Correlation Between Fidelity Income and State Street

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

Diversification Opportunities for Fidelity Income and State Street

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Fidelity and State is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Income Replacement and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target and Fidelity Income 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 Income Replacement are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Fidelity Income i.e., Fidelity Income and State Street go up and down completely randomly.

Pair Corralation between Fidelity Income and State Street

Assuming the 90 days horizon Fidelity Income is expected to generate 1.16 times less return on investment than State Street. But when comparing it to its historical volatility, Fidelity Income Replacement is 1.34 times less risky than State Street. It trades about 0.09 of its potential returns per unit of risk. State Street Target is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  979.00  in State Street Target on August 31, 2024 and sell it today you would earn a total of  177.00  from holding State Street Target or generate 18.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.79%
ValuesDaily Returns

Fidelity Income Replacement  vs.  State Street Target

 Performance 
       Timeline  
Fidelity Income Repl 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Income Replacement are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
State Street Target 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in State Street Target are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Income and State Street Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Income and State Street

The main advantage of trading using opposite Fidelity Income and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Income position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.
The idea behind Fidelity Income Replacement and State Street Target 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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