Correlation Between Rational Strategic and Fidelity Series

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

By analyzing existing cross correlation between Rational Strategic Allocation and Fidelity Series 1000, you can compare the effects of market volatilities on Rational Strategic and Fidelity Series 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 Rational Strategic with a short position of Fidelity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Strategic and Fidelity Series.

Diversification Opportunities for Rational Strategic and Fidelity Series

0.57

Correlation Coefficient

Rational Strategic  Fidelity Series

Very weak diversification

The 3 months correlation between Rational and Fidelity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Fidelity Series 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series 1000 and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series 1000 has no effect on the direction of Rational Strategic i.e., Rational Strategic and Fidelity Series go up and down completely randomly.

Pair Corralation between Rational Strategic and Fidelity Series

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Fidelity Series. In addition to that, Rational Strategic is 2.42 times more volatile than Fidelity Series 1000. It trades about -0.11 of its total potential returns per unit of risk. Fidelity Series 1000 is currently generating about 0.03 per unit of volatility. If you would invest  1,636  in Fidelity Series 1000 on December 22, 2024 and sell it today you would earn a total of  18.00  from holding Fidelity Series 1000 or generate 1.1% return on investment over 90 days.

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

Rational Strategic Allocation  vs.  Fidelity Series 1000

Rational Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Strategic Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fidelity Series 1000

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series 1000 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Strategic and Fidelity Series

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

The idea behind Rational Strategic Allocation and Fidelity Series 1000 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.