Correlation Between SPDR SP and Fidelity Corporate

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

By analyzing existing cross correlation between SPDR SP 500 and Fidelity Corporate Bond, you can compare the effects of market volatilities on SPDR SP and Fidelity Corporate 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 SP with a short position of Fidelity Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Fidelity Corporate.

Diversification Opportunities for SPDR SP and Fidelity Corporate

-0.42

Correlation Coefficient

SPDR SP  Fidelity Corporate

Very good diversification

The 3 months correlation between SPDR and Fidelity is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Fidelity Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Corporate Bond and SPDR SP 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 SP 500 are associated (or correlated) with Fidelity Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Corporate Bond has no effect on the direction of SPDR SP i.e., SPDR SP and Fidelity Corporate go up and down completely randomly.

Pair Corralation between SPDR SP and Fidelity Corporate

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the Fidelity Corporate. In addition to that, SPDR SP is 3.16 times more volatile than Fidelity Corporate Bond. It trades about -0.05 of its total potential returns per unit of risk. Fidelity Corporate Bond is currently generating about 0.08 per unit of volatility. If you would invest  4,608  in Fidelity Corporate Bond on December 28, 2024 and sell it today you would earn a total of  72.00  from holding Fidelity Corporate Bond or generate 1.56% return on investment over 90 days.

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

SPDR SP 500  vs.  Fidelity Corporate Bond

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Corporate Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Corporate Bond are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Fidelity Corporate 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 SPDR SP and Fidelity Corporate

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

The idea behind SPDR SP 500 and Fidelity Corporate Bond 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.