Correlation Between American Funds and Fidelity Climate
Can any of the company-specific risk be diversified away by investing in both American Funds and Fidelity Climate 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 Climate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds New and Fidelity Climate Action, you can compare the effects of market volatilities on American Funds and Fidelity Climate 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 Climate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Fidelity Climate.
Diversification Opportunities for American Funds and Fidelity Climate
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Fidelity Climate Action in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Climate Action 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 New are associated (or correlated) with Fidelity Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Climate Action has no effect on the direction of American Funds i.e., American Funds and Fidelity Climate go up and down completely randomly.
Pair Corralation between American Funds and Fidelity Climate
Assuming the 90 days horizon American Funds is expected to generate 1.27 times less return on investment than Fidelity Climate. But when comparing it to its historical volatility, American Funds New is 1.19 times less risky than Fidelity Climate. It trades about 0.07 of its potential returns per unit of risk. Fidelity Climate Action is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,173 in Fidelity Climate Action on September 3, 2024 and sell it today you would earn a total of 102.00 from holding Fidelity Climate Action or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds New vs. Fidelity Climate Action
Performance |
| Timeline |
| American Funds New |
| Fidelity Climate Action |
American Funds and Fidelity Climate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Fidelity Climate
The main advantage of trading using opposite American Funds and Fidelity Climate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Fidelity Climate 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 Climate will offset losses from the drop in Fidelity Climate's long position.| American Funds vs. The Hartford Small | American Funds vs. Oklahoma College Savings | American Funds vs. Ab Small Cap | American Funds vs. Small Cap Value |
| Fidelity Climate vs. Vanguard Reit Index | Fidelity Climate vs. Virtus Real Estate | Fidelity Climate vs. Franklin Real Estate | Fidelity Climate vs. Guggenheim Risk Managed |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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