Correlation Between Semper Short and Fidelity Large

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

By analyzing existing cross correlation between Semper Short Duration and Fidelity Large Cap, you can compare the effects of market volatilities on Semper Short and Fidelity Large 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 Semper Short with a short position of Fidelity Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semper Short and Fidelity Large.

Diversification Opportunities for Semper Short and Fidelity Large

0.88

Correlation Coefficient

Semper Short  Fidelity Large

Very poor diversification

The 3 months correlation between Semper and Fidelity is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Semper Short Duration and Fidelity Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Large Cap and Semper Short 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 Semper Short Duration are associated (or correlated) with Fidelity Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Large Cap has no effect on the direction of Semper Short i.e., Semper Short and Fidelity Large go up and down completely randomly.

Pair Corralation between Semper Short and Fidelity Large

Assuming the 90 days horizon Semper Short is expected to generate 3.92 times less return on investment than Fidelity Large. But when comparing it to its historical volatility, Semper Short Duration is 8.42 times less risky than Fidelity Large. It trades about 0.26 of its potential returns per unit of risk. Fidelity Large Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,683  in Fidelity Large Cap on October 5, 2024 and sell it today you would earn a total of  1,228  from holding Fidelity Large Cap or generate 45.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.68%
Values	Daily Returns

Semper Short Duration  vs.  Fidelity Large Cap

Semper Short Duration

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semper Short Duration are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Semper Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Semper Short and Fidelity Large

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

The idea behind Semper Short Duration and Fidelity Large Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.