Correlation Between Fidelity Select and Health Care

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

By analyzing existing cross correlation between Fidelity Select Semiconductors and Health Care Services, you can compare the effects of market volatilities on Fidelity Select and Health Care 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 Select with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Select and Health Care.

Diversification Opportunities for Fidelity Select and Health Care

-0.25

Correlation Coefficient

Fidelity Select  Health Care

Very good diversification

The 3 months correlation between Fidelity and Health is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Select Semiconductors and Health Care Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Services and Fidelity Select 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 Select Semiconductors are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Services has no effect on the direction of Fidelity Select i.e., Fidelity Select and Health Care go up and down completely randomly.

Pair Corralation between Fidelity Select and Health Care

Assuming the 90 days horizon Fidelity Select Semiconductors is expected to generate 1.42 times more return on investment than Health Care. However, Fidelity Select is 1.42 times more volatile than Health Care Services. It trades about 0.01 of its potential returns per unit of risk. Health Care Services is currently generating about -0.19 per unit of risk. If you would invest  3,448  in Fidelity Select Semiconductors on September 26, 2024 and sell it today you would earn a total of  8.00  from holding Fidelity Select Semiconductors or generate 0.23% return on investment over 90 days.

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

Fidelity Select Semiconductors  vs.  Health Care Services

Fidelity Select Semi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Select Semiconductors has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Fidelity Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Health Care Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity Select and Health Care

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

The idea behind Fidelity Select Semiconductors and Health Care Services 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.