Correlation Between First Trust and Fidelity Total
Can any of the company-specific risk be diversified away by investing in both First Trust and Fidelity Total 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 First Trust and Fidelity Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Low and Fidelity Total Bond, you can compare the effects of market volatilities on First Trust and Fidelity Total 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 First Trust with a short position of Fidelity Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Fidelity Total.
Diversification Opportunities for First Trust and Fidelity Total
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Low and Fidelity Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Bond and First Trust 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 First Trust Low are associated (or correlated) with Fidelity Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Bond has no effect on the direction of First Trust i.e., First Trust and Fidelity Total go up and down completely randomly.
Pair Corralation between First Trust and Fidelity Total
Given the investment horizon of 90 days First Trust is expected to generate 2.5 times less return on investment than Fidelity Total. But when comparing it to its historical volatility, First Trust Low is 1.76 times less risky than Fidelity Total. It trades about 0.06 of its potential returns per unit of risk. Fidelity Total Bond is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,544 in Fidelity Total Bond on August 30, 2024 and sell it today you would earn a total of 28.00 from holding Fidelity Total Bond or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Low vs. Fidelity Total Bond
Performance |
| Timeline |
| First Trust Low |
| Fidelity Total Bond |
First Trust and Fidelity Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Fidelity Total
The main advantage of trading using opposite First Trust and Fidelity Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Fidelity Total 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 Total will offset losses from the drop in Fidelity Total's long position.| First Trust vs. FlexShares Disciplined Duration | First Trust vs. Vanguard Mortgage Backed Securities | First Trust vs. Simplify Exchange Traded | First Trust vs. WisdomTree Mortgage Plus |
| Fidelity Total vs. Fidelity Corporate Bond | Fidelity Total vs. Fidelity Limited Term | Fidelity Total vs. Fidelity High Yield | Fidelity Total vs. Fidelity High Dividend |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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