Correlation Between Fidelity Contrafund and Fidelity Growth

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

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

Diversification Opportunities for Fidelity Contrafund and Fidelity Growth

0.93

Correlation Coefficient

Fidelity Contrafund  Fidelity Growth

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Contrafund and Fidelity Growth Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Growth Stra and Fidelity Contrafund 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 Contrafund are associated (or correlated) with Fidelity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Growth Stra has no effect on the direction of Fidelity Contrafund i.e., Fidelity Contrafund and Fidelity Growth go up and down completely randomly.

Pair Corralation between Fidelity Contrafund and Fidelity Growth

Assuming the 90 days horizon Fidelity Contrafund is expected to generate 2.39 times less return on investment than Fidelity Growth. But when comparing it to its historical volatility, Fidelity Contrafund is 1.25 times less risky than Fidelity Growth. It trades about 0.17 of its potential returns per unit of risk. Fidelity Growth Strategies is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  6,198  in Fidelity Growth Strategies on September 3, 2024 and sell it today you would earn a total of  1,539  from holding Fidelity Growth Strategies or generate 24.83% return on investment over 90 days.

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

Fidelity Contrafund  vs.  Fidelity Growth Strategies

Fidelity Contrafund

Risk-Adjusted Performance

13 of 100

Good

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

Fidelity Growth Stra

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Growth Strategies are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Contrafund and Fidelity Growth

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

The idea behind Fidelity Contrafund and Fidelity Growth Strategies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.