Correlation Between American Funds and Fidelity Income
Can any of the company-specific risk be diversified away by investing in both American Funds and Fidelity Income 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 American Funds and Fidelity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Fidelity Income Replacement, you can compare the effects of market volatilities on American Funds and Fidelity Income 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 American Funds with a short position of Fidelity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Fidelity Income.
Diversification Opportunities for American Funds and Fidelity Income
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Fidelity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Fidelity Income Replacement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Income Repl and American Funds 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 American Funds Fundamental are associated (or correlated) with Fidelity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Income Repl has no effect on the direction of American Funds i.e., American Funds and Fidelity Income go up and down completely randomly.
Pair Corralation between American Funds and Fidelity Income
Assuming the 90 days horizon American Funds Fundamental is expected to generate 4.7 times more return on investment than Fidelity Income. However, American Funds is 4.7 times more volatile than Fidelity Income Replacement. It trades about 0.2 of its potential returns per unit of risk. Fidelity Income Replacement is currently generating about -0.2 per unit of risk. If you would invest 8,096 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 322.00 from holding American Funds Fundamental or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Funds Fundamental vs. Fidelity Income Replacement
Performance |
| Timeline |
| American Funds Funda |
| Fidelity Income Repl |
American Funds and Fidelity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Fidelity Income
The main advantage of trading using opposite American Funds and Fidelity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Fidelity Income 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 Income will offset losses from the drop in Fidelity Income's long position.| American Funds vs. World Energy Fund | American Funds vs. Energy Services Fund | American Funds vs. Alpsalerian Energy Infrastructure | American Funds vs. Icon Natural Resources |
| Fidelity Income vs. Franklin Emerging Market | Fidelity Income vs. Ashmore Emerging Markets | Fidelity Income vs. Mid Cap 15x Strategy | Fidelity Income vs. Western Asset Short |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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