Correlation Between Fidelity Contrafund and Bmo Large

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

By analyzing existing cross correlation between Fidelity Contrafund K6 and Bmo Large Cap Growth, you can compare the effects of market volatilities on Fidelity Contrafund and Bmo Large 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 Contrafund with a short position of Bmo Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Contrafund and Bmo Large.

Diversification Opportunities for Fidelity Contrafund and Bmo Large

0.92

Correlation Coefficient

Fidelity Contrafund  Bmo Large

Almost no diversification

The 3 months correlation between Fidelity and Bmo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Contrafund K6 and Bmo Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bmo Large Cap and Fidelity Contrafund 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 Contrafund K6 are associated (or correlated) with Bmo Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bmo Large Cap has no effect on the direction of Fidelity Contrafund i.e., Fidelity Contrafund and Bmo Large go up and down completely randomly.

Pair Corralation between Fidelity Contrafund and Bmo Large

Assuming the 90 days horizon Fidelity Contrafund is expected to generate 1.37 times less return on investment than Bmo Large. But when comparing it to its historical volatility, Fidelity Contrafund K6 is 1.12 times less risky than Bmo Large. It trades about 0.18 of its potential returns per unit of risk. Bmo Large Cap Growth is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,221  in Bmo Large Cap Growth on September 14, 2024 and sell it today you would earn a total of  284.00  from holding Bmo Large Cap Growth or generate 12.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Fidelity Contrafund K6  vs.  Bmo Large Cap Growth

Fidelity Contrafund

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund K6 are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Contrafund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bmo Large Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bmo Large Cap Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Bmo Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Contrafund and Bmo Large

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

The idea behind Fidelity Contrafund K6 and Bmo Large Cap Growth 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.