Correlation Between Princeton Adaptive and Fidelity Trend

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

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

Diversification Opportunities for Princeton Adaptive and Fidelity Trend

0.22

Correlation Coefficient

Princeton Adaptive  Fidelity Trend

Modest diversification

The 3 months correlation between Princeton and Fidelity is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Adaptive Premium and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend and Princeton Adaptive 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 Princeton Adaptive Premium are associated (or correlated) with Fidelity Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of Princeton Adaptive i.e., Princeton Adaptive and Fidelity Trend go up and down completely randomly.

Pair Corralation between Princeton Adaptive and Fidelity Trend

Assuming the 90 days horizon Princeton Adaptive Premium is expected to under-perform the Fidelity Trend. But the mutual fund apears to be less risky and, when comparing its historical volatility, Princeton Adaptive Premium is 3.29 times less risky than Fidelity Trend. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Fidelity Trend Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  18,455  in Fidelity Trend Fund on September 15, 2024 and sell it today you would earn a total of  3,356  from holding Fidelity Trend Fund or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Princeton Adaptive Premium  vs.  Fidelity Trend Fund

Princeton Adaptive

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Trend

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Trend Fund are ranked lower than 18 (%) 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.

Pair Trading with Princeton Adaptive and Fidelity Trend

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

The idea behind Princeton Adaptive Premium and Fidelity Trend Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.