Correlation Between Fidelity Total and Western Asset

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

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

Diversification Opportunities for Fidelity Total and Western Asset

1.0

Correlation Coefficient

Fidelity Total  Western Asset

No risk reduction

The 3 months correlation between Fidelity and Western is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Total Bond and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total and Fidelity Total 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 Total Bond are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Total has no effect on the direction of Fidelity Total i.e., Fidelity Total and Western Asset go up and down completely randomly.

Pair Corralation between Fidelity Total and Western Asset

Given the investment horizon of 90 days Fidelity Total Bond is expected to generate 0.84 times more return on investment than Western Asset. However, Fidelity Total Bond is 1.19 times less risky than Western Asset. It trades about -0.03 of its potential returns per unit of risk. Western Asset Total is currently generating about -0.03 per unit of risk. If you would invest  4,598  in Fidelity Total Bond on August 30, 2024 and sell it today you would lose (26.00) from holding Fidelity Total Bond or give up 0.57% of portfolio value over 90 days.

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

Fidelity Total Bond  vs.  Western Asset Total

Fidelity Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fidelity Total is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Western Asset Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Total has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Western Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidelity Total and Western Asset

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

The idea behind Fidelity Total Bond and Western Asset Total 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.