Correlation Between IShares Broad and Fidelity Corporate

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

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

Diversification Opportunities for IShares Broad and Fidelity Corporate

0.96

Correlation Coefficient

IShares Broad  Fidelity Corporate

Almost no diversification

The 3 months correlation between IShares and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD 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 IShares Broad 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 iShares Broad USD 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 IShares Broad i.e., IShares Broad and Fidelity Corporate go up and down completely randomly.

Pair Corralation between IShares Broad and Fidelity Corporate

Given the investment horizon of 90 days IShares Broad is expected to generate 1.0 times less return on investment than Fidelity Corporate. But when comparing it to its historical volatility, iShares Broad USD is 1.03 times less risky than Fidelity Corporate. It trades about 0.11 of its potential returns per unit of risk. Fidelity Corporate Bond is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,589  in Fidelity Corporate Bond on December 29, 2024 and sell it today you would earn a total of  93.00  from holding Fidelity Corporate Bond or generate 2.03% return on investment over 90 days.

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

iShares Broad USD  vs.  Fidelity Corporate Bond

iShares Broad USD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Broad USD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, IShares Broad is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity Corporate Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Corporate Bond are ranked lower than 8 (%) 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 IShares Broad and Fidelity Corporate

The main advantage of trading using opposite IShares Broad and Fidelity Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad 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 iShares Broad USD 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.