Correlation Between Fidelity Balanced and American Growth
Can any of the company-specific risk be diversified away by investing in both Fidelity Balanced and American Growth 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 Fidelity Balanced and American Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Balanced Fund and American Growth Fund, you can compare the effects of market volatilities on Fidelity Balanced and American Growth 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 Fidelity Balanced with a short position of American Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Balanced and American Growth.
Diversification Opportunities for Fidelity Balanced and American Growth
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Balanced Fund and American Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Growth and Fidelity Balanced 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 Fidelity Balanced Fund are associated (or correlated) with American Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Growth has no effect on the direction of Fidelity Balanced i.e., Fidelity Balanced and American Growth go up and down completely randomly.
Pair Corralation between Fidelity Balanced and American Growth
Assuming the 90 days horizon Fidelity Balanced is expected to generate 2.65 times less return on investment than American Growth. But when comparing it to its historical volatility, Fidelity Balanced Fund is 2.04 times less risky than American Growth. It trades about 0.39 of its potential returns per unit of risk. American Growth Fund is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 573.00 in American Growth Fund on September 3, 2024 and sell it today you would earn a total of 63.00 from holding American Growth Fund or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Balanced Fund vs. American Growth Fund
Performance |
| Timeline |
| Fidelity Balanced |
| American Growth |
Fidelity Balanced and American Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Balanced and American Growth
The main advantage of trading using opposite Fidelity Balanced and American Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Balanced position performs unexpectedly, American Growth 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 American Growth will offset losses from the drop in American Growth's long position.| Fidelity Balanced vs. Fidelity Puritan Fund | Fidelity Balanced vs. Fidelity Low Priced Stock | Fidelity Balanced vs. Fidelity International Discovery | Fidelity Balanced vs. Fidelity Contrafund |
| American Growth vs. Vanguard Financials Index | American Growth vs. Fidelity Advisor Financial | American Growth vs. Gabelli Global Financial | American Growth vs. 1919 Financial Services |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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