Correlation Between American Funds and Fidelity Government
Can any of the company-specific risk be diversified away by investing in both American Funds and Fidelity Government 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 Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Government and Fidelity Government Income, you can compare the effects of market volatilities on American Funds and Fidelity Government 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 Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Fidelity Government.
Diversification Opportunities for American Funds and Fidelity Government
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Fidelity Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Government 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 Government are associated (or correlated) with Fidelity Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Government has no effect on the direction of American Funds i.e., American Funds and Fidelity Government go up and down completely randomly.
Pair Corralation between American Funds and Fidelity Government
Assuming the 90 days horizon American Funds is expected to generate 1.2 times less return on investment than Fidelity Government. In addition to that, American Funds is 1.03 times more volatile than Fidelity Government Income. It trades about 0.02 of its total potential returns per unit of risk. Fidelity Government Income is currently generating about 0.02 per unit of volatility. If you would invest 884.00 in Fidelity Government Income on September 3, 2024 and sell it today you would earn a total of 36.00 from holding Fidelity Government Income or generate 4.07% 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 Government vs. Fidelity Government Income
Performance |
| Timeline |
| American Funds Government |
| Fidelity Government |
American Funds and Fidelity Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Fidelity Government
The main advantage of trading using opposite American Funds and Fidelity Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Fidelity Government 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 Government will offset losses from the drop in Fidelity Government's long position.| American Funds vs. Vanguard Gnma Fund | American Funds vs. Vanguard Intermediate Term Government | American Funds vs. Us Government Securities | American Funds vs. Us Government Securities |
| Fidelity Government vs. Vanguard Gnma Fund | Fidelity Government vs. Vanguard Intermediate Term Government | Fidelity Government vs. Us Government Securities | Fidelity Government vs. Us Government Securities |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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