Correlation Between Fidelity Disciplined and Fidelity Trend

Can any of the company-specific risk be diversified away by investing in both Fidelity Disciplined and Fidelity Trend 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 Trend 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 Trend Fund, you can compare the effects of market volatilities on Fidelity Disciplined and Fidelity Trend 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 Trend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Disciplined and Fidelity Trend.

Diversification Opportunities for Fidelity Disciplined and Fidelity Trend

0.99

Correlation Coefficient

Fidelity Disciplined  Fidelity Trend

No risk reduction

The 3 months correlation between Fidelity and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Disciplined Equity and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend 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 Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of Fidelity Disciplined i.e., Fidelity Disciplined and Fidelity Trend go up and down completely randomly.

Pair Corralation between Fidelity Disciplined and Fidelity Trend

Assuming the 90 days horizon Fidelity Disciplined is expected to generate 1.89 times less return on investment than Fidelity Trend. But when comparing it to its historical volatility, Fidelity Disciplined Equity is 1.4 times less risky than Fidelity Trend. It trades about 0.18 of its potential returns per unit of risk. Fidelity Trend Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  17,759  in Fidelity Trend Fund on September 1, 2024 and sell it today you would earn a total of  3,558  from holding Fidelity Trend Fund or generate 20.03% return on investment over 90 days.

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

Fidelity Disciplined Equity  vs.  Fidelity Trend Fund

Fidelity Disciplined

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Disciplined Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Disciplined may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Fidelity Trend

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Trend Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Trend showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Disciplined and Fidelity Trend

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

The idea behind Fidelity Disciplined Equity and Fidelity Trend 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.