Correlation Between Fidelity Extended and Fidelity Equity

Can any of the company-specific risk be diversified away by investing in both Fidelity Extended and Fidelity Equity 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 Fidelity Equity 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 Fidelity Equity Dividend, you can compare the effects of market volatilities on Fidelity Extended and Fidelity Equity 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 Fidelity Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Extended and Fidelity Equity.

Diversification Opportunities for Fidelity Extended and Fidelity Equity

0.8

Correlation Coefficient

Fidelity Extended  Fidelity Equity

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Extended Market and Fidelity Equity Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Dividend 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 Fidelity Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Dividend has no effect on the direction of Fidelity Extended i.e., Fidelity Extended and Fidelity Equity go up and down completely randomly.

Pair Corralation between Fidelity Extended and Fidelity Equity

Assuming the 90 days horizon Fidelity Extended Market is expected to generate 1.83 times more return on investment than Fidelity Equity. However, Fidelity Extended is 1.83 times more volatile than Fidelity Equity Dividend. It trades about 0.19 of its potential returns per unit of risk. Fidelity Equity Dividend is currently generating about 0.01 per unit of risk. If you would invest  8,522  in Fidelity Extended Market on September 16, 2024 and sell it today you would earn a total of  1,106  from holding Fidelity Extended Market or generate 12.98% return on investment over 90 days.

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

Fidelity Extended Market  vs.  Fidelity Equity Dividend

Fidelity Extended Market

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Extended Market are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Extended may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Equity Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Equity Dividend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Equity 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 Extended and Fidelity Equity

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

The idea behind Fidelity Extended Market and Fidelity Equity Dividend 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..