Correlation Between American Funds and Fidelity Contrafund
Can any of the company-specific risk be diversified away by investing in both American Funds and Fidelity Contrafund 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 Contrafund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds The and Fidelity Contrafund K6, you can compare the effects of market volatilities on American Funds and Fidelity Contrafund 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 Contrafund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Fidelity Contrafund.
Diversification Opportunities for American Funds and Fidelity Contrafund
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Fidelity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Fidelity Contrafund K6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund 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 The are associated (or correlated) with Fidelity Contrafund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Contrafund has no effect on the direction of American Funds i.e., American Funds and Fidelity Contrafund go up and down completely randomly.
Pair Corralation between American Funds and Fidelity Contrafund
Assuming the 90 days horizon American Funds The is expected to generate 0.98 times more return on investment than Fidelity Contrafund. However, American Funds The is 1.02 times less risky than Fidelity Contrafund. It trades about 0.23 of its potential returns per unit of risk. Fidelity Contrafund K6 is currently generating about 0.18 per unit of risk. If you would invest 7,457 in American Funds The on September 12, 2024 and sell it today you would earn a total of 901.00 from holding American Funds The or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds The vs. Fidelity Contrafund K6
Performance |
| Timeline |
| American Funds |
| Fidelity Contrafund |
American Funds and Fidelity Contrafund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Fidelity Contrafund
The main advantage of trading using opposite American Funds and Fidelity Contrafund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Fidelity Contrafund 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 Contrafund will offset losses from the drop in Fidelity Contrafund's long position.| American Funds vs. Growth Fund Investor | American Funds vs. Select Fund Investor | American Funds vs. International Growth Fund | American Funds vs. Heritage Fund Investor |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |