Correlation Between Dimensional Core and Fidelity Covington

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

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

Diversification Opportunities for Dimensional Core and Fidelity Covington

0.57

Correlation Coefficient

Dimensional Core  Fidelity Covington

Very weak diversification

The 3 months correlation between Dimensional and Fidelity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and Dimensional Core 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 Dimensional Core Equity are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Dimensional Core i.e., Dimensional Core and Fidelity Covington go up and down completely randomly.

Pair Corralation between Dimensional Core and Fidelity Covington

Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.03 times more return on investment than Fidelity Covington. However, Dimensional Core is 1.03 times more volatile than Fidelity Covington Trust. It trades about 0.07 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.03 per unit of risk. If you would invest  3,409  in Dimensional Core Equity on September 27, 2024 and sell it today you would earn a total of  119.00  from holding Dimensional Core Equity or generate 3.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	38.1%
Values	Daily Returns

Dimensional Core Equity  vs.  Fidelity Covington Trust

Dimensional Core Equity

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Dimensional Core is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fidelity Covington Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional Core and Fidelity Covington

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

The idea behind Dimensional Core Equity and Fidelity Covington Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.