Correlation Between Fidelity Income and Schwab Target

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

By analyzing existing cross correlation between Fidelity Income Replacement and Schwab Target 2025, you can compare the effects of market volatilities on Fidelity Income and Schwab Target 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 Income with a short position of Schwab Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Income and Schwab Target.

Diversification Opportunities for Fidelity Income and Schwab Target

0.63

Correlation Coefficient

Fidelity Income  Schwab Target

Poor diversification

The 3 months correlation between Fidelity and Schwab is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Income Replacement and Schwab Target 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Target 2025 and Fidelity Income 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 Income Replacement are associated (or correlated) with Schwab Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Target 2025 has no effect on the direction of Fidelity Income i.e., Fidelity Income and Schwab Target go up and down completely randomly.

Pair Corralation between Fidelity Income and Schwab Target

Assuming the 90 days horizon Fidelity Income is expected to generate 4.12 times less return on investment than Schwab Target. But when comparing it to its historical volatility, Fidelity Income Replacement is 1.31 times less risky than Schwab Target. It trades about 0.03 of its potential returns per unit of risk. Schwab Target 2025 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,548  in Schwab Target 2025 on September 12, 2024 and sell it today you would earn a total of  34.00  from holding Schwab Target 2025 or generate 2.2% return on investment over 90 days.

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

Fidelity Income Replacement  vs.  Schwab Target 2025

Fidelity Income Repl

Risk-Adjusted Performance

2 of 100

Insignificant

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

Schwab Target 2025

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Target 2025 are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Target 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 Income and Schwab Target

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

The idea behind Fidelity Income Replacement and Schwab Target 2025 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.