Correlation Between Federated Total and Fidelity Total

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

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

Diversification Opportunities for Federated Total and Fidelity Total

0.97

Correlation Coefficient

Federated Total  Fidelity Total

Almost no diversification

The 3 months correlation between Federated and Fidelity is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return and Fidelity Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Bond and Federated Total 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 Federated Total Return are associated (or correlated) with Fidelity Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Bond has no effect on the direction of Federated Total i.e., Federated Total and Fidelity Total go up and down completely randomly.

Pair Corralation between Federated Total and Fidelity Total

Assuming the 90 days horizon Federated Total Return is expected to under-perform the Fidelity Total. In addition to that, Federated Total is 1.01 times more volatile than Fidelity Total Bond. It trades about -0.1 of its total potential returns per unit of risk. Fidelity Total Bond is currently generating about -0.07 per unit of volatility. If you would invest  976.00  in Fidelity Total Bond on September 12, 2024 and sell it today you would lose (13.00) from holding Fidelity Total Bond or give up 1.33% of portfolio value over 90 days.

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

Federated Total Return  vs.  Fidelity Total Bond

Federated Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federated Total and Fidelity Total

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

The idea behind Federated Total Return and Fidelity Total Bond 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.