Correlation Between Fidelity 500 and Nicholas
Can any of the company-specific risk be diversified away by investing in both Fidelity 500 and Nicholas 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 500 and Nicholas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity 500 Index and Nicholas Ltd Edition, you can compare the effects of market volatilities on Fidelity 500 and Nicholas 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 500 with a short position of Nicholas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity 500 and Nicholas.
Diversification Opportunities for Fidelity 500 and Nicholas
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Nicholas is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity 500 Index and Nicholas Ltd Edition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Edition and Fidelity 500 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 500 Index are associated (or correlated) with Nicholas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Edition has no effect on the direction of Fidelity 500 i.e., Fidelity 500 and Nicholas go up and down completely randomly.
Pair Corralation between Fidelity 500 and Nicholas
Assuming the 90 days horizon Fidelity 500 is expected to generate 2.5 times less return on investment than Nicholas. But when comparing it to its historical volatility, Fidelity 500 Index is 1.62 times less risky than Nicholas. It trades about 0.15 of its potential returns per unit of risk. Nicholas Ltd Edition is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,733 in Nicholas Ltd Edition on August 29, 2024 and sell it today you would earn a total of 205.00 from holding Nicholas Ltd Edition or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity 500 Index vs. Nicholas Ltd Edition
Performance |
| Timeline |
| Fidelity 500 Index |
| Nicholas Edition |
Fidelity 500 and Nicholas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity 500 and Nicholas
The main advantage of trading using opposite Fidelity 500 and Nicholas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 500 position performs unexpectedly, Nicholas 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 Nicholas will offset losses from the drop in Nicholas' long position.| Fidelity 500 vs. Fidelity Total Market | Fidelity 500 vs. Fidelity Extended Market | Fidelity 500 vs. Fidelity Zero Total | Fidelity 500 vs. Fidelity Small Cap |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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