Correlation Between Fidelity Magellan and Infrastructure Fund

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

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

Diversification Opportunities for Fidelity Magellan and Infrastructure Fund

0.21

Correlation Coefficient

Fidelity Magellan  Infrastructure Fund

Modest diversification

The 3 months correlation between Fidelity and Infrastructure is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Magellan Fund and Infrastructure Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infrastructure Fund and Fidelity Magellan 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 Magellan Fund are associated (or correlated) with Infrastructure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infrastructure Fund has no effect on the direction of Fidelity Magellan i.e., Fidelity Magellan and Infrastructure Fund go up and down completely randomly.

Pair Corralation between Fidelity Magellan and Infrastructure Fund

Assuming the 90 days horizon Fidelity Magellan Fund is expected to generate 3.26 times more return on investment than Infrastructure Fund. However, Fidelity Magellan is 3.26 times more volatile than Infrastructure Fund Retail. It trades about 0.04 of its potential returns per unit of risk. Infrastructure Fund Retail is currently generating about -0.04 per unit of risk. 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

Fidelity Magellan Fund  vs.  Infrastructure Fund Retail

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.

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.

Pair Trading with Fidelity Magellan and Infrastructure Fund

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

The idea behind Fidelity Magellan Fund and Infrastructure Fund Retail 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.