Correlation Between Blue Ribbon and Fidelity Canadian

Can any of the company-specific risk be diversified away by investing in both Blue Ribbon and Fidelity Canadian 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 Blue Ribbon and Fidelity Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blue Ribbon Income and Fidelity Canadian Growth, you can compare the effects of market volatilities on Blue Ribbon and Fidelity Canadian 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 Blue Ribbon with a short position of Fidelity Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Ribbon and Fidelity Canadian.

Diversification Opportunities for Blue Ribbon and Fidelity Canadian

0.43

Correlation Coefficient

Blue Ribbon  Fidelity Canadian

Very weak diversification

The 3 months correlation between Blue and Fidelity is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Blue Ribbon Income and Fidelity Canadian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian Growth and Blue Ribbon 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 Blue Ribbon Income are associated (or correlated) with Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian Growth has no effect on the direction of Blue Ribbon i.e., Blue Ribbon and Fidelity Canadian go up and down completely randomly.

Pair Corralation between Blue Ribbon and Fidelity Canadian

Assuming the 90 days trading horizon Blue Ribbon is expected to generate 1.98 times less return on investment than Fidelity Canadian. But when comparing it to its historical volatility, Blue Ribbon Income is 1.2 times less risky than Fidelity Canadian. It trades about 0.04 of its potential returns per unit of risk. Fidelity Canadian Growth is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,267  in Fidelity Canadian Growth on October 25, 2024 and sell it today you would earn a total of  3,438  from holding Fidelity Canadian Growth or generate 41.59% return on investment over 90 days.

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

Blue Ribbon Income  vs.  Fidelity Canadian Growth

Blue Ribbon Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Ribbon Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Blue Ribbon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Canadian Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Canadian Growth has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Fidelity Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blue Ribbon and Fidelity Canadian

The main advantage of trading using opposite Blue Ribbon and Fidelity Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Ribbon position performs unexpectedly, Fidelity Canadian 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 Canadian will offset losses from the drop in Fidelity Canadian's long position.

The idea behind Blue Ribbon Income and Fidelity Canadian Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.