Correlation Between Fidelity Covington and Fidelity Corporate
Can any of the company-specific risk be diversified away by investing in both Fidelity Covington and Fidelity Corporate 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 Covington and Fidelity Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Covington Trust and Fidelity Corporate Bond, you can compare the effects of market volatilities on Fidelity Covington and Fidelity Corporate 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 Covington with a short position of Fidelity Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Covington and Fidelity Corporate.
Diversification Opportunities for Fidelity Covington and Fidelity Corporate
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fidelity and Fidelity is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and Fidelity Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Corporate Bond and Fidelity Covington 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 Covington Trust are associated (or correlated) with Fidelity Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Corporate Bond has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and Fidelity Corporate go up and down completely randomly.
Pair Corralation between Fidelity Covington and Fidelity Corporate
Given the investment horizon of 90 days Fidelity Covington Trust is expected to generate 1.5 times more return on investment than Fidelity Corporate. However, Fidelity Covington is 1.5 times more volatile than Fidelity Corporate Bond. It trades about 0.3 of its potential returns per unit of risk. Fidelity Corporate Bond is currently generating about 0.12 per unit of risk. If you would invest 3,372 in Fidelity Covington Trust on September 1, 2024 and sell it today you would earn a total of 183.00 from holding Fidelity Covington Trust or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Covington Trust vs. Fidelity Corporate Bond
Performance |
| Timeline |
| Fidelity Covington Trust |
| Fidelity Corporate Bond |
Fidelity Covington and Fidelity Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Covington and Fidelity Corporate
The main advantage of trading using opposite Fidelity Covington and Fidelity Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington position performs unexpectedly, Fidelity Corporate 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 Corporate will offset losses from the drop in Fidelity Corporate's long position.| Fidelity Covington vs. Vanguard Total Stock | Fidelity Covington vs. SPDR SP 500 | Fidelity Covington vs. iShares Core SP | Fidelity Covington vs. Vanguard Dividend Appreciation |
| Fidelity Corporate vs. Fidelity Limited Term | Fidelity Corporate vs. Fidelity Total Bond | Fidelity Corporate vs. Fidelity High Yield | Fidelity Corporate vs. Fidelity Low Volatility |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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