Correlation Between Capital World and Fidelity Stock
Can any of the company-specific risk be diversified away by investing in both Capital World and Fidelity Stock 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 Capital World and Fidelity Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Growth and Fidelity Stock Selector, you can compare the effects of market volatilities on Capital World and Fidelity Stock 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 Capital World with a short position of Fidelity Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Fidelity Stock.
Diversification Opportunities for Capital World and Fidelity Stock
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector and Capital World 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 Capital World Growth are associated (or correlated) with Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Capital World i.e., Capital World and Fidelity Stock go up and down completely randomly.
Pair Corralation between Capital World and Fidelity Stock
Assuming the 90 days horizon Capital World is expected to generate 2.32 times less return on investment than Fidelity Stock. But when comparing it to its historical volatility, Capital World Growth is 1.1 times less risky than Fidelity Stock. It trades about 0.11 of its potential returns per unit of risk. Fidelity Stock Selector is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 7,750 in Fidelity Stock Selector on September 1, 2024 and sell it today you would earn a total of 852.00 from holding Fidelity Stock Selector or generate 10.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Capital World Growth vs. Fidelity Stock Selector
Performance |
Timeline |
Capital World Growth |
Fidelity Stock Selector |
Capital World and Fidelity Stock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capital World and Fidelity Stock
The main advantage of trading using opposite Capital World and Fidelity Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Fidelity Stock 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 Stock will offset losses from the drop in Fidelity Stock's long position.Capital World vs. Qs Large Cap | Capital World vs. Fundamental Large Cap | Capital World vs. Qs Large Cap | Capital World vs. Touchstone Large Cap |
Fidelity Stock vs. Fidelity Disciplined Equity | Fidelity Stock vs. Fidelity Trend Fund | Fidelity Stock vs. Fidelity Stock Selector | Fidelity Stock vs. Ab Flexfee Thematic |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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