Correlation Between Global Healthcare and Fidelity Technology

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

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

Diversification Opportunities for Global Healthcare and Fidelity Technology

-0.8

Correlation Coefficient

Global Healthcare  Fidelity Technology

Pay attention - limited upside

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

Pair Corralation between Global Healthcare and Fidelity Technology

Assuming the 90 days trading horizon Global Healthcare Income is expected to under-perform the Fidelity Technology. In addition to that, Global Healthcare is 1.47 times more volatile than Fidelity Technology Innovators. It trades about -0.08 of its total potential returns per unit of risk. Fidelity Technology Innovators is currently generating about 0.18 per unit of volatility. If you would invest  9,605  in Fidelity Technology Innovators on September 3, 2024 and sell it today you would earn a total of  840.00  from holding Fidelity Technology Innovators or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Global Healthcare Income  vs.  Fidelity Technology Innovators

Global Healthcare Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Healthcare Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy technical and fundamental indicators, Global Healthcare is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity Technology

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Global Healthcare and Fidelity Technology

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

The idea behind Global Healthcare Income and Fidelity Technology Innovators 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.