Correlation Between IShares SPTSX and Fidelity Momentum

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Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and Fidelity Momentum 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 IShares SPTSX and Fidelity Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX 60 and Fidelity Momentum ETF, you can compare the effects of market volatilities on IShares SPTSX and Fidelity Momentum 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 IShares SPTSX with a short position of Fidelity Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Fidelity Momentum.

Diversification Opportunities for IShares SPTSX and Fidelity Momentum

ISharesFidelityDiversified AwayISharesFidelityDiversified Away100%
0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between IShares and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and Fidelity Momentum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum ETF and IShares SPTSX 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 iShares SPTSX 60 are associated (or correlated) with Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum ETF has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Fidelity Momentum go up and down completely randomly.

Pair Corralation between IShares SPTSX and Fidelity Momentum

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.76 times less return on investment than Fidelity Momentum. But when comparing it to its historical volatility, iShares SPTSX 60 is 1.88 times less risky than Fidelity Momentum. It trades about 0.32 of its potential returns per unit of risk. Fidelity Momentum ETF is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,491  in Fidelity Momentum ETF on September 13, 2024 and sell it today you would earn a total of  254.00  from holding Fidelity Momentum ETF or generate 17.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

iShares SPTSX 60  vs.  Fidelity Momentum ETF

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 5101520
JavaScript chart by amCharts 3.21.15XIU FCMO
       Timeline  
iShares SPTSX 60 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX 60 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec35.53636.53737.53838.539
Fidelity Momentum ETF 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Momentum ETF are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Fidelity Momentum exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1515.51616.51717.518

IShares SPTSX and Fidelity Momentum Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.32-0.94-0.56-0.180.07490.440.821.21.581.96 0.51.01.5
JavaScript chart by amCharts 3.21.15XIU FCMO
       Returns  

Pair Trading with IShares SPTSX and Fidelity Momentum

The main advantage of trading using opposite IShares SPTSX and Fidelity Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, Fidelity Momentum 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 Momentum will offset losses from the drop in Fidelity Momentum's long position.
The idea behind iShares SPTSX 60 and Fidelity Momentum ETF 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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