Correlation Between Dodge Stock and Fidelity Focused

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

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

Diversification Opportunities for Dodge Stock and Fidelity Focused

0.79

Correlation Coefficient

Dodge Stock  Fidelity Focused

Poor diversification

The 3 months correlation between Dodge and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Fidelity Focused Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Focused Stock and Dodge Stock 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 Dodge Stock Fund are associated (or correlated) with Fidelity Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Focused Stock has no effect on the direction of Dodge Stock i.e., Dodge Stock and Fidelity Focused go up and down completely randomly.

Pair Corralation between Dodge Stock and Fidelity Focused

Assuming the 90 days horizon Dodge Stock Fund is expected to under-perform the Fidelity Focused. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Stock Fund is 1.25 times less risky than Fidelity Focused. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Fidelity Focused Stock is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,055  in Fidelity Focused Stock on September 20, 2024 and sell it today you would lose (102.00) from holding Fidelity Focused Stock or give up 2.52% of portfolio value over 90 days.

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

Dodge Stock Fund  vs.  Fidelity Focused Stock

Dodge Stock Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dodge Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Focused Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Focused Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fidelity Focused is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dodge Stock and Fidelity Focused

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

The idea behind Dodge Stock Fund and Fidelity Focused Stock 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.