Correlation Between Fidelity Trend and Pimco Income

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

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

Diversification Opportunities for Fidelity Trend and Pimco Income

0.6

Correlation Coefficient

Fidelity Trend  Pimco Income

Poor diversification

The 3 months correlation between Fidelity and Pimco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Trend Fund and Pimco Income Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income Strategy and Fidelity Trend 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 Trend Fund are associated (or correlated) with Pimco Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Income Strategy has no effect on the direction of Fidelity Trend i.e., Fidelity Trend and Pimco Income go up and down completely randomly.

Pair Corralation between Fidelity Trend and Pimco Income

Assuming the 90 days horizon Fidelity Trend Fund is expected to generate 5.24 times more return on investment than Pimco Income. However, Fidelity Trend is 5.24 times more volatile than Pimco Income Strategy. It trades about 0.18 of its potential returns per unit of risk. Pimco Income Strategy is currently generating about 0.38 per unit of risk. If you would invest  20,840  in Fidelity Trend Fund on September 15, 2024 and sell it today you would earn a total of  895.00  from holding Fidelity Trend Fund or generate 4.29% return on investment over 90 days.

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

Fidelity Trend Fund  vs.  Pimco Income Strategy

Fidelity Trend

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Trend Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Trend showed solid returns over the last few months and may actually be approaching a breakup point.

Pimco Income Strategy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Pimco Income is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Trend and Pimco Income

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

The idea behind Fidelity Trend Fund and Pimco Income Strategy 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.