Correlation Between Tech Leaders and Fidelity Canadian

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

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

Diversification Opportunities for Tech Leaders and Fidelity Canadian

0.88

Correlation Coefficient

Tech Leaders  Fidelity Canadian

Very poor diversification

The 3 months correlation between Tech and Fidelity is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tech Leaders Income and Fidelity Canadian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian Growth and Tech Leaders 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 Tech Leaders Income are associated (or correlated) with Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian Growth has no effect on the direction of Tech Leaders i.e., Tech Leaders and Fidelity Canadian go up and down completely randomly.

Pair Corralation between Tech Leaders and Fidelity Canadian

Assuming the 90 days trading horizon Tech Leaders is expected to generate 1.22 times less return on investment than Fidelity Canadian. In addition to that, Tech Leaders is 1.68 times more volatile than Fidelity Canadian Growth. It trades about 0.15 of its total potential returns per unit of risk. Fidelity Canadian Growth is currently generating about 0.31 per unit of volatility. If you would invest  11,602  in Fidelity Canadian Growth on September 2, 2024 and sell it today you would earn a total of  1,534  from holding Fidelity Canadian Growth or generate 13.22% return on investment over 90 days.

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

Tech Leaders Income  vs.  Fidelity Canadian Growth

Tech Leaders Income

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Leaders Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tech Leaders may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Canadian Growth

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian Growth are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, Fidelity Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tech Leaders and Fidelity Canadian

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

The idea behind Tech Leaders Income and Fidelity Canadian Growth 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.