Correlation Between SPDR ICE and Fidelity Preferred

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

By analyzing existing cross correlation between SPDR ICE Preferred and Fidelity Preferred Securities, you can compare the effects of market volatilities on SPDR ICE and Fidelity Preferred 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 SPDR ICE with a short position of Fidelity Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR ICE and Fidelity Preferred.

Diversification Opportunities for SPDR ICE and Fidelity Preferred

0.79

Correlation Coefficient

SPDR ICE  Fidelity Preferred

Poor diversification

The 3 months correlation between SPDR and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPDR ICE Preferred and Fidelity Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Preferred and SPDR ICE 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 SPDR ICE Preferred are associated (or correlated) with Fidelity Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Preferred has no effect on the direction of SPDR ICE i.e., SPDR ICE and Fidelity Preferred go up and down completely randomly.

Pair Corralation between SPDR ICE and Fidelity Preferred

Considering the 90-day investment horizon SPDR ICE Preferred is expected to under-perform the Fidelity Preferred. In addition to that, SPDR ICE is 2.75 times more volatile than Fidelity Preferred Securities. It trades about -0.08 of its total potential returns per unit of risk. Fidelity Preferred Securities is currently generating about -0.01 per unit of volatility. If you would invest  2,191  in Fidelity Preferred Securities on September 13, 2024 and sell it today you would lose (1.00) from holding Fidelity Preferred Securities or give up 0.05% of portfolio value over 90 days.

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

SPDR ICE Preferred  vs.  Fidelity Preferred Securities

SPDR ICE Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR ICE Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Fidelity Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Preferred Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Fidelity Preferred is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR ICE and Fidelity Preferred

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

The idea behind SPDR ICE Preferred and Fidelity Preferred Securities 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.