Correlation Between Fidelity Equity and Fidelity Disciplined

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

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

Diversification Opportunities for Fidelity Equity and Fidelity Disciplined

0.84

Correlation Coefficient

Fidelity Equity  Fidelity Disciplined

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 Equity Income Fund and Fidelity Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Disciplined and Fidelity Equity 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 Equity Income Fund are associated (or correlated) with Fidelity Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Disciplined has no effect on the direction of Fidelity Equity i.e., Fidelity Equity and Fidelity Disciplined go up and down completely randomly.

Pair Corralation between Fidelity Equity and Fidelity Disciplined

Assuming the 90 days horizon Fidelity Equity Income Fund is expected to under-perform the Fidelity Disciplined. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Equity Income Fund is 1.96 times less risky than Fidelity Disciplined. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Fidelity Disciplined Equity is currently generating about -0.05 of returns per unit of risk over similar time horizon. 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 Equity Income Fund  vs.  Fidelity Disciplined Equity

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.

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.

Pair Trading with Fidelity Equity and Fidelity Disciplined

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

The idea behind Fidelity Equity Income Fund and Fidelity Disciplined Equity 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.