Correlation Between Fidelity Managed and Fidelity Growth

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

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

Diversification Opportunities for Fidelity Managed and Fidelity Growth

-0.47

Correlation Coefficient

Fidelity Managed  Fidelity Growth

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Managed Retirement and Fidelity Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Growth Income and Fidelity Managed 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 Managed Retirement are associated (or correlated) with Fidelity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Growth Income has no effect on the direction of Fidelity Managed i.e., Fidelity Managed and Fidelity Growth go up and down completely randomly.

Pair Corralation between Fidelity Managed and Fidelity Growth

Assuming the 90 days horizon Fidelity Managed is expected to generate 6.43 times less return on investment than Fidelity Growth. But when comparing it to its historical volatility, Fidelity Managed Retirement is 2.6 times less risky than Fidelity Growth. It trades about 0.09 of its potential returns per unit of risk. Fidelity Growth Income is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,330  in Fidelity Growth Income on August 31, 2024 and sell it today you would earn a total of  253.00  from holding Fidelity Growth Income or generate 4.0% return on investment over 90 days.

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

Fidelity Managed Retirement  vs.  Fidelity Growth Income

Fidelity Managed Ret

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Managed Retirement are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Fidelity Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Growth Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Growth Income are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Growth is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Managed and Fidelity Growth

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

The idea behind Fidelity Managed Retirement and Fidelity Growth Income 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.