Correlation Between CI Canada and Fidelity Equity

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

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

Diversification Opportunities for CI Canada and Fidelity Equity

0.08

Correlation Coefficient

CI Canada  Fidelity Equity

Significant diversification

The 3 months correlation between FLI and Fidelity is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Lifeco and Fidelity Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Premium and CI Canada 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 CI Canada Lifeco are associated (or correlated) with Fidelity Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Premium has no effect on the direction of CI Canada i.e., CI Canada and Fidelity Equity go up and down completely randomly.

Pair Corralation between CI Canada and Fidelity Equity

Assuming the 90 days trading horizon CI Canada is expected to generate 4.95 times less return on investment than Fidelity Equity. But when comparing it to its historical volatility, CI Canada Lifeco is 4.85 times less risky than Fidelity Equity. It trades about 0.18 of its potential returns per unit of risk. Fidelity Equity Premium is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,849  in Fidelity Equity Premium on September 5, 2024 and sell it today you would earn a total of  909.00  from holding Fidelity Equity Premium or generate 49.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.6%
Values	Daily Returns

CI Canada Lifeco  vs.  Fidelity Equity Premium

CI Canada Lifeco

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Lifeco are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, CI Canada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Equity Premium

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Equity Premium are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Fidelity Equity exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CI Canada and Fidelity Equity

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

The idea behind CI Canada Lifeco and Fidelity Equity Premium 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..