Correlation Between Fidelity Disciplined and Fidelity Equity

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

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

Diversification Opportunities for Fidelity Disciplined and Fidelity Equity

0.84

Correlation Coefficient

Fidelity Disciplined  Fidelity Equity

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Disciplined Equity and Fidelity Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Income and Fidelity Disciplined 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 Disciplined Equity are associated (or correlated) with Fidelity Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Income has no effect on the direction of Fidelity Disciplined i.e., Fidelity Disciplined and Fidelity Equity go up and down completely randomly.

Pair Corralation between Fidelity Disciplined and Fidelity Equity

Assuming the 90 days horizon Fidelity Disciplined Equity is expected to generate 1.96 times more return on investment than Fidelity Equity. However, Fidelity Disciplined is 1.96 times more volatile than Fidelity Equity Income Fund. It trades about -0.05 of its potential returns per unit of risk. Fidelity Equity Income Fund is currently generating about -0.13 per unit of risk. If you would invest  7,140  in Fidelity Disciplined Equity on September 24, 2024 and sell it today you would lose (349.00) from holding Fidelity Disciplined Equity or give up 4.89% of portfolio value over 90 days.

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

Fidelity Disciplined Equity  vs.  Fidelity Equity Income Fund

Fidelity Disciplined

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fidelity Disciplined and Fidelity Equity

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

The idea behind Fidelity Disciplined Equity and Fidelity Equity Income Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.