Correlation Between IShares SPTSX and Fidelity LongShort

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

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

Diversification Opportunities for IShares SPTSX and Fidelity LongShort

0.62

Correlation Coefficient

IShares SPTSX  Fidelity LongShort

Poor diversification

The 3 months correlation between IShares and Fidelity is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Fidelity LongShort Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity LongShort and IShares SPTSX 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 SPTSX Capped are associated (or correlated) with Fidelity LongShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity LongShort has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Fidelity LongShort go up and down completely randomly.

Pair Corralation between IShares SPTSX and Fidelity LongShort

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.46 times less return on investment than Fidelity LongShort. In addition to that, IShares SPTSX is 2.8 times more volatile than Fidelity LongShort Alternative. It trades about 0.07 of its total potential returns per unit of risk. Fidelity LongShort Alternative is currently generating about 0.29 per unit of volatility. If you would invest  1,088  in Fidelity LongShort Alternative on September 5, 2024 and sell it today you would earn a total of  108.00  from holding Fidelity LongShort Alternative or generate 9.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

iShares SPTSX Capped  vs.  Fidelity LongShort Alternative

iShares SPTSX Capped

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity LongShort

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity LongShort Alternative are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Fidelity LongShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares SPTSX and Fidelity LongShort

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

The idea behind iShares SPTSX Capped and Fidelity LongShort Alternative 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.