Correlation Between Stone Ridge and Fidelity Growth

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

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

Diversification Opportunities for Stone Ridge and Fidelity Growth

-0.2

Correlation Coefficient

Stone Ridge  Fidelity Growth

Good diversification

The 3 months correlation between Stone and Fidelity is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge High and Fidelity Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Growth Income and Stone Ridge 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 Stone Ridge High are associated (or correlated) with Fidelity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Growth Income has no effect on the direction of Stone Ridge i.e., Stone Ridge and Fidelity Growth go up and down completely randomly.

Pair Corralation between Stone Ridge and Fidelity Growth

Assuming the 90 days horizon Stone Ridge High is expected to under-perform the Fidelity Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Stone Ridge High is 3.01 times less risky than Fidelity Growth. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Fidelity Growth Income is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,192  in Fidelity Growth Income on December 29, 2024 and sell it today you would earn a total of  41.00  from holding Fidelity Growth Income or generate 0.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Stone Ridge High  vs.  Fidelity Growth Income

Stone Ridge High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stone Ridge High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Growth Income

Risk-Adjusted Performance

Weak

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

Pair Trading with Stone Ridge and Fidelity Growth

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

The idea behind Stone Ridge High and Fidelity Growth Income 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.