Correlation Between IShares Select and Fidelity Value

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

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

Diversification Opportunities for IShares Select and Fidelity Value

0.91

Correlation Coefficient

IShares Select  Fidelity Value

Almost no diversification

The 3 months correlation between IShares and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and Fidelity Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Value Factor and IShares Select 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 Select Dividend are associated (or correlated) with Fidelity Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Value Factor has no effect on the direction of IShares Select i.e., IShares Select and Fidelity Value go up and down completely randomly.

Pair Corralation between IShares Select and Fidelity Value

Considering the 90-day investment horizon IShares Select is expected to generate 1.33 times less return on investment than Fidelity Value. In addition to that, IShares Select is 1.03 times more volatile than Fidelity Value Factor. It trades about 0.16 of its total potential returns per unit of risk. Fidelity Value Factor is currently generating about 0.22 per unit of volatility. If you would invest  5,827  in Fidelity Value Factor on September 3, 2024 and sell it today you would earn a total of  589.00  from holding Fidelity Value Factor or generate 10.11% return on investment over 90 days.

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

iShares Select Dividend  vs.  Fidelity Value Factor

iShares Select Dividend

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Value Factor

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Value Factor are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Fidelity Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Select and Fidelity Value

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

The idea behind iShares Select Dividend and Fidelity Value Factor 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.