Correlation Between Aggressive Growth and Fidelity Total

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

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

Diversification Opportunities for Aggressive Growth and Fidelity Total

0.94

Correlation Coefficient

Aggressive Growth  Fidelity Total

Almost no diversification

The 3 months correlation between Aggressive and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Allocation and Fidelity Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Market and Aggressive Growth 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 Aggressive Growth Allocation are associated (or correlated) with Fidelity Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Market has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Fidelity Total go up and down completely randomly.

Pair Corralation between Aggressive Growth and Fidelity Total

Assuming the 90 days horizon Aggressive Growth is expected to generate 1.75 times less return on investment than Fidelity Total. But when comparing it to its historical volatility, Aggressive Growth Allocation is 1.29 times less risky than Fidelity Total. It trades about 0.16 of its potential returns per unit of risk. Fidelity Total Market is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  15,199  in Fidelity Total Market on September 3, 2024 and sell it today you would earn a total of  1,598  from holding Fidelity Total Market or generate 10.51% return on investment over 90 days.

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

Aggressive Growth Allocation  vs.  Fidelity Total Market

Aggressive Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Allocation are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aggressive Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Total Market

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Aggressive Growth and Fidelity Total

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

The idea behind Aggressive Growth Allocation and Fidelity Total Market 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.