Correlation Between IShares 0 and Fidelity Low

Can any of the company-specific risk be diversified away by investing in both IShares 0 and Fidelity Low 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 IShares 0 and Fidelity Low into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 3 Month and Fidelity Low Duration, you can compare the effects of market volatilities on IShares 0 and Fidelity Low 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 IShares 0 with a short position of Fidelity Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and Fidelity Low.

Diversification Opportunities for IShares 0 and Fidelity Low

0.87

Correlation Coefficient

IShares 0  Fidelity Low

Very poor diversification

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

Pair Corralation between IShares 0 and Fidelity Low

Given the investment horizon of 90 days IShares 0 is expected to generate 1.29 times less return on investment than Fidelity Low. But when comparing it to its historical volatility, iShares 0 3 Month is 9.17 times less risky than Fidelity Low. It trades about 1.16 of its potential returns per unit of risk. Fidelity Low Duration is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,987  in Fidelity Low Duration on September 16, 2024 and sell it today you would earn a total of  23.00  from holding Fidelity Low Duration or generate 0.46% return on investment over 90 days.

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

iShares 0 3 Month  vs.  Fidelity Low Duration

iShares 0 3

Risk-Adjusted Performance

89 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 3 Month are ranked lower than 89 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fidelity Low Duration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Duration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Fidelity Low is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares 0 and Fidelity Low

The main advantage of trading using opposite IShares 0 and Fidelity Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 position performs unexpectedly, Fidelity Low 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 Low will offset losses from the drop in Fidelity Low's long position.

The idea behind iShares 0 3 Month and Fidelity Low Duration 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.