Correlation Between Financial Industries and Fidelity Investment
Can any of the company-specific risk be diversified away by investing in both Financial Industries and Fidelity Investment 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 Financial Industries and Fidelity Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Fidelity Investment Trust, you can compare the effects of market volatilities on Financial Industries and Fidelity Investment 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 Financial Industries with a short position of Fidelity Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Fidelity Investment.
Diversification Opportunities for Financial Industries and Fidelity Investment
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financial and Fidelity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Fidelity Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Investment Trust and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Fidelity Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Investment Trust has no effect on the direction of Financial Industries i.e., Financial Industries and Fidelity Investment go up and down completely randomly.
Pair Corralation between Financial Industries and Fidelity Investment
Assuming the 90 days horizon Financial Industries Fund is expected to generate 52.17 times more return on investment than Fidelity Investment. However, Financial Industries is 52.17 times more volatile than Fidelity Investment Trust. It trades about 0.29 of its potential returns per unit of risk. Fidelity Investment Trust is currently generating about -0.06 per unit of risk. If you would invest 1,900 in Financial Industries Fund on September 1, 2024 and sell it today you would earn a total of 228.00 from holding Financial Industries Fund or generate 12.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Financial Industries Fund vs. Fidelity Investment Trust
Performance |
| Timeline |
| Financial Industries |
| Fidelity Investment Trust |
Financial Industries and Fidelity Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Fidelity Investment
The main advantage of trading using opposite Financial Industries and Fidelity Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Fidelity Investment 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 Investment will offset losses from the drop in Fidelity Investment's long position.The idea behind Financial Industries Fund and Fidelity Investment Trust 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.
| Fidelity Investment vs. Vanguard Total Stock | Fidelity Investment vs. Vanguard 500 Index | Fidelity Investment vs. Vanguard Total Stock | Fidelity Investment vs. Vanguard Total Stock |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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