Correlation Between Fidelity Extended and Aquila Three

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

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

Diversification Opportunities for Fidelity Extended and Aquila Three

0.84

Correlation Coefficient

Fidelity Extended  Aquila Three

Very poor diversification

The 3 months correlation between Fidelity and Aquila is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Extended Market and Aquila Three Peaks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Three Peaks and Fidelity Extended 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 Extended Market are associated (or correlated) with Aquila Three. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Three Peaks has no effect on the direction of Fidelity Extended i.e., Fidelity Extended and Aquila Three go up and down completely randomly.

Pair Corralation between Fidelity Extended and Aquila Three

Assuming the 90 days horizon Fidelity Extended Market is expected to generate 1.21 times more return on investment than Aquila Three. However, Fidelity Extended is 1.21 times more volatile than Aquila Three Peaks. It trades about 0.26 of its potential returns per unit of risk. Aquila Three Peaks is currently generating about 0.2 per unit of risk. If you would invest  8,315  in Fidelity Extended Market on September 4, 2024 and sell it today you would earn a total of  1,507  from holding Fidelity Extended Market or generate 18.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Fidelity Extended Market  vs.  Aquila Three Peaks

Fidelity Extended Market

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Extended Market are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Extended showed solid returns over the last few months and may actually be approaching a breakup point.

Aquila Three Peaks

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Fidelity Extended and Aquila Three

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

The idea behind Fidelity Extended Market and Aquila Three Peaks 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.