Correlation Between Short-term Bond and Fidelity Flex

Can any of the company-specific risk be diversified away by investing in both Short-term Bond and Fidelity Flex at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Short-term Bond and Fidelity Flex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Short Term Bond Fund and Fidelity Flex Servative, you can compare the effects of market volatilities on Short-term Bond and Fidelity Flex and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Short-term Bond with a short position of Fidelity Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Bond and Fidelity Flex.

Diversification Opportunities for Short-term Bond and Fidelity Flex

0.75

Correlation Coefficient

Short-term Bond  Fidelity Flex

Poor diversification

The 3 months correlation between Short-term and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Bond Fund and Fidelity Flex Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Flex Servative and Short-term Bond is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Short Term Bond Fund are associated (or correlated) with Fidelity Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Flex Servative has no effect on the direction of Short-term Bond i.e., Short-term Bond and Fidelity Flex go up and down completely randomly.

Pair Corralation between Short-term Bond and Fidelity Flex

Assuming the 90 days horizon Short Term Bond Fund is expected to under-perform the Fidelity Flex. In addition to that, Short-term Bond is 1.42 times more volatile than Fidelity Flex Servative. It trades about -0.18 of its total potential returns per unit of risk. Fidelity Flex Servative is currently generating about -0.08 per unit of volatility. If you would invest  1,004  in Fidelity Flex Servative on October 11, 2024 and sell it today you would lose (1.00) from holding Fidelity Flex Servative or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Short Term Bond Fund  vs.  Fidelity Flex Servative

Short Term Bond

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Bond Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Short-term Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Flex Servative

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Flex Servative are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fidelity Flex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short-term Bond and Fidelity Flex

The main advantage of trading using opposite Short-term Bond and Fidelity Flex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Bond position performs unexpectedly, Fidelity Flex can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidelity Flex will offset losses from the drop in Fidelity Flex's long position.

The idea behind Short Term Bond Fund and Fidelity Flex Servative pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.