Correlation Between SPDR Barclays and Fidelity Limited

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

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

Diversification Opportunities for SPDR Barclays and Fidelity Limited

0.83

Correlation Coefficient

SPDR Barclays  Fidelity Limited

Very poor diversification

The 3 months correlation between SPDR and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Short and Fidelity Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Limited Term and SPDR Barclays 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 SPDR Barclays Short are associated (or correlated) with Fidelity Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Limited Term has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and Fidelity Limited go up and down completely randomly.

Pair Corralation between SPDR Barclays and Fidelity Limited

Given the investment horizon of 90 days SPDR Barclays Short is expected to generate 0.56 times more return on investment than Fidelity Limited. However, SPDR Barclays Short is 1.78 times less risky than Fidelity Limited. It trades about 0.18 of its potential returns per unit of risk. Fidelity Limited Term is currently generating about 0.09 per unit of risk. If you would invest  2,968  in SPDR Barclays Short on September 22, 2024 and sell it today you would earn a total of  10.00  from holding SPDR Barclays Short or generate 0.34% return on investment over 90 days.

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

SPDR Barclays Short  vs.  Fidelity Limited Term

SPDR Barclays Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Short has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Limited Term has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity Limited is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Barclays and Fidelity Limited

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

The idea behind SPDR Barclays Short and Fidelity Limited Term 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.