Correlation Between Seix Us and Fidelity Contrafund

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

By analyzing existing cross correlation between Seix Govt Sec and Fidelity Contrafund, you can compare the effects of market volatilities on Seix Us and Fidelity Contrafund 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 Seix Us with a short position of Fidelity Contrafund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seix Us and Fidelity Contrafund.

Diversification Opportunities for Seix Us and Fidelity Contrafund

0.56

Correlation Coefficient

Seix Us  Fidelity Contrafund

Very weak diversification

The 3 months correlation between Seix and Fidelity is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Seix Govt Sec and Fidelity Contrafund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund and Seix Us 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 Seix Govt Sec are associated (or correlated) with Fidelity Contrafund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Contrafund has no effect on the direction of Seix Us i.e., Seix Us and Fidelity Contrafund go up and down completely randomly.

Pair Corralation between Seix Us and Fidelity Contrafund

Assuming the 90 days horizon Seix Govt Sec is not expected to generate positive returns. However, Seix Govt Sec is 22.74 times less risky than Fidelity Contrafund. It waists most of its returns potential to compensate for thr risk taken. Fidelity Contrafund is generating about 0.01 per unit of risk. If you would invest  2,170  in Fidelity Contrafund on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Fidelity Contrafund or generate 0.14% return on investment over 90 days.

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

Seix Govt Sec  vs.  Fidelity Contrafund

Seix Govt Sec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seix Govt Sec are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Seix Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Contrafund

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Contrafund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seix Us and Fidelity Contrafund

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

The idea behind Seix Govt Sec and Fidelity Contrafund 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.