Correlation Between Fidelity Equity-income and Fidelity Magellan

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

Diversification Opportunities for Fidelity Equity-income and Fidelity Magellan

0.91

Correlation Coefficient

Fidelity Equity-income  Fidelity Magellan

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Equity Income Fund and Fidelity Magellan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Magellan and Fidelity Equity-income 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 Magellan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Magellan has no effect on the direction of Fidelity Equity-income i.e., Fidelity Equity-income and Fidelity Magellan go up and down completely randomly.

Pair Corralation between Fidelity Equity-income and Fidelity Magellan

Assuming the 90 days horizon Fidelity Equity-income is expected to generate 1.46 times less return on investment than Fidelity Magellan. But when comparing it to its historical volatility, Fidelity Equity Income Fund is 1.52 times less risky than Fidelity Magellan. It trades about 0.16 of its potential returns per unit of risk. Fidelity Magellan Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,442  in Fidelity Magellan Fund on September 2, 2024 and sell it today you would earn a total of  133.00  from holding Fidelity Magellan Fund or generate 9.22% return on investment over 90 days.

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

Fidelity Equity Income Fund  vs.  Fidelity Magellan Fund

Fidelity Equity Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Equity Income Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Equity-income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Magellan

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Magellan Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Magellan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Equity-income and Fidelity Magellan

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

The idea behind Fidelity Equity Income Fund and Fidelity Magellan 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.