Correlation Between Fidelity Blue and Commerce Midcap

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

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

Diversification Opportunities for Fidelity Blue and Commerce Midcap

0.92

Correlation Coefficient

Fidelity Blue  Commerce Midcap

Almost no diversification

The 3 months correlation between Fidelity and Commerce is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Blue Chip and Commerce Midcap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Midcap Value and Fidelity Blue 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 Fidelity Blue Chip are associated (or correlated) with Commerce Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Midcap Value has no effect on the direction of Fidelity Blue i.e., Fidelity Blue and Commerce Midcap go up and down completely randomly.

Pair Corralation between Fidelity Blue and Commerce Midcap

Assuming the 90 days horizon Fidelity Blue Chip is expected to generate 1.34 times more return on investment than Commerce Midcap. However, Fidelity Blue is 1.34 times more volatile than Commerce Midcap Value. It trades about 0.21 of its potential returns per unit of risk. Commerce Midcap Value is currently generating about 0.17 per unit of risk. If you would invest  19,726  in Fidelity Blue Chip on September 2, 2024 and sell it today you would earn a total of  2,890  from holding Fidelity Blue Chip or generate 14.65% return on investment over 90 days.

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

Fidelity Blue Chip  vs.  Commerce Midcap Value

Fidelity Blue Chip

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Blue Chip are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Blue showed solid returns over the last few months and may actually be approaching a breakup point.

Commerce Midcap Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Midcap Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Commerce Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Blue and Commerce Midcap

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

The idea behind Fidelity Blue Chip and Commerce Midcap Value 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.