Correlation Between Fidelity Sai and Franklin Federal

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

By analyzing existing cross correlation between Fidelity Sai Short Term and Franklin Federal Limited Term, you can compare the effects of market volatilities on Fidelity Sai and Franklin Federal 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 Sai with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Sai and Franklin Federal.

Diversification Opportunities for Fidelity Sai and Franklin Federal

0.67

Correlation Coefficient

Fidelity Sai  Franklin Federal

Poor diversification

The 3 months correlation between Fidelity and Franklin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sai Short Term and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim and Fidelity Sai 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 Sai Short Term are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of Fidelity Sai i.e., Fidelity Sai and Franklin Federal go up and down completely randomly.

Pair Corralation between Fidelity Sai and Franklin Federal

Assuming the 90 days horizon Fidelity Sai Short Term is expected to under-perform the Franklin Federal. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Sai Short Term is 1.11 times less risky than Franklin Federal. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Franklin Federal Limited Term is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,032  in Franklin Federal Limited Term on September 29, 2024 and sell it today you would lose (5.00) from holding Franklin Federal Limited Term or give up 0.48% of portfolio value over 90 days.

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

Fidelity Sai Short Term  vs.  Franklin Federal Limited Term

Fidelity Sai Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Federal Lim

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Federal Limited Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Federal 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 Sai and Franklin Federal

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

The idea behind Fidelity Sai Short Term and Franklin Federal Limited Term 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.