Correlation Between Strategic Allocation and Fidelity Series

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

By analyzing existing cross correlation between Strategic Allocation Moderate and Fidelity Series Canada, you can compare the effects of market volatilities on Strategic Allocation and Fidelity Series 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 Strategic Allocation with a short position of Fidelity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and Fidelity Series.

Diversification Opportunities for Strategic Allocation and Fidelity Series

0.84

Correlation Coefficient

Strategic Allocation  Fidelity Series

Very poor diversification

The 3 months correlation between Strategic and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Fidelity Series Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series Canada and Strategic Allocation 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 Strategic Allocation Moderate are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series Canada has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Fidelity Series go up and down completely randomly.

Pair Corralation between Strategic Allocation and Fidelity Series

Assuming the 90 days horizon Strategic Allocation Moderate is expected to under-perform the Fidelity Series. But the mutual fund apears to be less risky and, when comparing its historical volatility, Strategic Allocation Moderate is 1.3 times less risky than Fidelity Series. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Fidelity Series Canada is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,666  in Fidelity Series Canada on December 4, 2024 and sell it today you would lose (78.00) from holding Fidelity Series Canada or give up 4.68% of portfolio value over 90 days.

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

Strategic Allocation Moderate  vs.  Fidelity Series Canada

Strategic Allocation

Risk-Adjusted Performance

Very Weak

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

Fidelity Series Canada

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Strategic Allocation and Fidelity Series

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

The idea behind Strategic Allocation Moderate and Fidelity Series Canada 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.