Correlation Between Fidelity Government and Fidelity Intermediate

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

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

Diversification Opportunities for Fidelity Government and Fidelity Intermediate

0.99

Correlation Coefficient

Fidelity Government  Fidelity Intermediate

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

Pair Corralation between Fidelity Government and Fidelity Intermediate

Assuming the 90 days horizon Fidelity Government Income is expected to under-perform the Fidelity Intermediate. In addition to that, Fidelity Government is 1.65 times more volatile than Fidelity Intermediate Bond. It trades about -0.18 of its total potential returns per unit of risk. Fidelity Intermediate Bond is currently generating about -0.16 per unit of volatility. If you would invest  1,028  in Fidelity Intermediate Bond on September 25, 2024 and sell it today you would lose (21.00) from holding Fidelity Intermediate Bond or give up 2.04% of portfolio value over 90 days.

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

Fidelity Government Income  vs.  Fidelity Intermediate Bond

Fidelity Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Intermediate Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Intermediate 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 Government and Fidelity Intermediate

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

The idea behind Fidelity Government Income and Fidelity Intermediate Bond 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.