Correlation Between Mid Cap and Fidelity Puritan

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Fidelity Puritan Fund, you can compare the effects of market volatilities on Mid Cap and Fidelity Puritan 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 Mid Cap with a short position of Fidelity Puritan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Fidelity Puritan.

Diversification Opportunities for Mid Cap and Fidelity Puritan

0.87

Correlation Coefficient

Mid Cap  Fidelity Puritan

Very poor diversification

The 3 months correlation between Mid and Fidelity is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Fidelity Puritan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Puritan and Mid Cap 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 Mid Cap 15x Strategy are associated (or correlated) with Fidelity Puritan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Puritan has no effect on the direction of Mid Cap i.e., Mid Cap and Fidelity Puritan go up and down completely randomly.

Pair Corralation between Mid Cap and Fidelity Puritan

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to under-perform the Fidelity Puritan. In addition to that, Mid Cap is 2.11 times more volatile than Fidelity Puritan Fund. It trades about -0.26 of its total potential returns per unit of risk. Fidelity Puritan Fund is currently generating about -0.24 per unit of volatility. If you would invest  2,598  in Fidelity Puritan Fund on October 8, 2024 and sell it today you would lose (90.00) from holding Fidelity Puritan Fund or give up 3.46% of portfolio value over 90 days.

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

Mid Cap 15x Strategy  vs.  Fidelity Puritan Fund

Mid Cap 15x

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Puritan

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Mid Cap and Fidelity Puritan

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

The idea behind Mid Cap 15x Strategy and Fidelity Puritan Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.