Correlation Between SPDR SP and Fidelity Stocks

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

By analyzing existing cross correlation between SPDR SP 500 and Fidelity Stocks for, you can compare the effects of market volatilities on SPDR SP and Fidelity Stocks 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 SP with a short position of Fidelity Stocks. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Fidelity Stocks.

Diversification Opportunities for SPDR SP and Fidelity Stocks

0.83

Correlation Coefficient

SPDR SP  Fidelity Stocks

Very poor diversification

The 3 months correlation between SPDR and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Fidelity Stocks for in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stocks for and SPDR SP 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 SP 500 are associated (or correlated) with Fidelity Stocks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stocks for has no effect on the direction of SPDR SP i.e., SPDR SP and Fidelity Stocks go up and down completely randomly.

Pair Corralation between SPDR SP and Fidelity Stocks

Considering the 90-day investment horizon SPDR SP is expected to generate 1.98 times less return on investment than Fidelity Stocks. But when comparing it to its historical volatility, SPDR SP 500 is 1.13 times less risky than Fidelity Stocks. It trades about 0.16 of its potential returns per unit of risk. Fidelity Stocks for is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  4,360  in Fidelity Stocks for on August 30, 2024 and sell it today you would earn a total of  259.00  from holding Fidelity Stocks for or generate 5.94% return on investment over 90 days.

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

SPDR SP 500  vs.  Fidelity Stocks for

SPDR SP 500

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Fidelity Stocks for

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Stocks for are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Fidelity Stocks may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SPDR SP and Fidelity Stocks

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

The idea behind SPDR SP 500 and Fidelity Stocks for 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.