Correlation Between IShares NASDAQ and Fidelity High

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

By analyzing existing cross correlation between iShares NASDAQ 100 and Fidelity High Quality, you can compare the effects of market volatilities on IShares NASDAQ and Fidelity High 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 NASDAQ with a short position of Fidelity High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Fidelity High.

Diversification Opportunities for IShares NASDAQ and Fidelity High

0.86

Correlation Coefficient

IShares NASDAQ  Fidelity High

Very poor diversification

The 3 months correlation between IShares and Fidelity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and Fidelity High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Quality and IShares NASDAQ 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 NASDAQ 100 are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Quality has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and Fidelity High go up and down completely randomly.

Pair Corralation between IShares NASDAQ and Fidelity High

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to under-perform the Fidelity High. In addition to that, IShares NASDAQ is 1.57 times more volatile than Fidelity High Quality. It trades about -0.1 of its total potential returns per unit of risk. Fidelity High Quality is currently generating about -0.03 per unit of volatility. If you would invest  5,721  in Fidelity High Quality on December 30, 2024 and sell it today you would lose (122.00) from holding Fidelity High Quality or give up 2.13% of portfolio value over 90 days.

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

iShares NASDAQ 100  vs.  Fidelity High Quality

iShares NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Fidelity High Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity High Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fidelity High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares NASDAQ and Fidelity High

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

The idea behind iShares NASDAQ 100 and Fidelity High Quality 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.