Correlation Between Stellar and Fidelity Short

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

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

Diversification Opportunities for Stellar and Fidelity Short

0.77

Correlation Coefficient

Stellar  Fidelity Short

Poor diversification

The 3 months correlation between Stellar and Fidelity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Fidelity Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Short Duration and Stellar 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 Stellar are associated (or correlated) with Fidelity Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Short Duration has no effect on the direction of Stellar i.e., Stellar and Fidelity Short go up and down completely randomly.

Pair Corralation between Stellar and Fidelity Short

Assuming the 90 days trading horizon Stellar is expected to generate 77.61 times more return on investment than Fidelity Short. However, Stellar is 77.61 times more volatile than Fidelity Short Duration. It trades about 0.25 of its potential returns per unit of risk. Fidelity Short Duration is currently generating about 0.22 per unit of risk. If you would invest  9.33  in Stellar on October 24, 2024 and sell it today you would earn a total of  34.67  from holding Stellar or generate 371.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Stellar  vs.  Fidelity Short Duration

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Short Duration

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Short Duration are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Fidelity Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stellar and Fidelity Short

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

The idea behind Stellar and Fidelity Short Duration 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.