Correlation Between Fidelity Quality and Fidelity High

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

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

Diversification Opportunities for Fidelity Quality and Fidelity High

0.69

Correlation Coefficient

Fidelity Quality  Fidelity High

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Quality Factor and Fidelity High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Yield and Fidelity Quality 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 Quality Factor are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Yield has no effect on the direction of Fidelity Quality i.e., Fidelity Quality and Fidelity High go up and down completely randomly.

Pair Corralation between Fidelity Quality and Fidelity High

Given the investment horizon of 90 days Fidelity Quality Factor is expected to generate 2.1 times more return on investment than Fidelity High. However, Fidelity Quality is 2.1 times more volatile than Fidelity High Yield. It trades about 0.11 of its potential returns per unit of risk. Fidelity High Yield is currently generating about 0.1 per unit of risk. If you would invest  4,286  in Fidelity Quality Factor on September 24, 2024 and sell it today you would earn a total of  2,298  from holding Fidelity Quality Factor or generate 53.62% return on investment over 90 days.

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

Fidelity Quality Factor  vs.  Fidelity High Yield

Fidelity Quality Factor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Quality Factor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fidelity Quality is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Fidelity High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Fidelity High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Quality and Fidelity High

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

The idea behind Fidelity Quality Factor and Fidelity High Yield 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.