Correlation Between Infrastructure Fund and Fidelity Magellan

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

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

Diversification Opportunities for Infrastructure Fund and Fidelity Magellan

0.21

Correlation Coefficient

Infrastructure Fund  Fidelity Magellan

Modest diversification

The 3 months correlation between Infrastructure and Fidelity is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Infrastructure Fund Retail and Fidelity Magellan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Magellan and Infrastructure Fund 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 Infrastructure Fund Retail 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 Infrastructure Fund i.e., Infrastructure Fund and Fidelity Magellan go up and down completely randomly.

Pair Corralation between Infrastructure Fund and Fidelity Magellan

Assuming the 90 days horizon Infrastructure Fund Retail is expected to under-perform the Fidelity Magellan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Infrastructure Fund Retail is 3.26 times less risky than Fidelity Magellan. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Fidelity Magellan Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,510  in Fidelity Magellan Fund on September 19, 2024 and sell it today you would earn a total of  27.00  from holding Fidelity Magellan Fund or generate 1.79% return on investment over 90 days.

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

Infrastructure Fund Retail  vs.  Fidelity Magellan Fund

Infrastructure Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastructure Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Infrastructure Fund 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

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Magellan Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Magellan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Infrastructure Fund and Fidelity Magellan

The main advantage of trading using opposite Infrastructure Fund and Fidelity Magellan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infrastructure Fund 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 Infrastructure Fund Retail 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..