Correlation Between Morningstar Unconstrained and Fidelity Contrafund
Can any of the company-specific risk be diversified away by investing in both Morningstar Unconstrained and Fidelity Contrafund 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 Morningstar Unconstrained and Fidelity Contrafund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Unconstrained Allocation and Fidelity Contrafund K6, you can compare the effects of market volatilities on Morningstar Unconstrained and Fidelity Contrafund 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 Morningstar Unconstrained with a short position of Fidelity Contrafund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Unconstrained and Fidelity Contrafund.
Diversification Opportunities for Morningstar Unconstrained and Fidelity Contrafund
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morningstar and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Unconstrained Allo and Fidelity Contrafund K6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund and Morningstar Unconstrained 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 Morningstar Unconstrained Allocation are associated (or correlated) with Fidelity Contrafund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Contrafund has no effect on the direction of Morningstar Unconstrained i.e., Morningstar Unconstrained and Fidelity Contrafund go up and down completely randomly.
Pair Corralation between Morningstar Unconstrained and Fidelity Contrafund
Assuming the 90 days horizon Morningstar Unconstrained is expected to generate 1.65 times less return on investment than Fidelity Contrafund. But when comparing it to its historical volatility, Morningstar Unconstrained Allocation is 1.43 times less risky than Fidelity Contrafund. It trades about 0.22 of its potential returns per unit of risk. Fidelity Contrafund K6 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,008 in Fidelity Contrafund K6 on September 1, 2024 and sell it today you would earn a total of 149.00 from holding Fidelity Contrafund K6 or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Morningstar Unconstrained Allo vs. Fidelity Contrafund K6
Performance |
| Timeline |
| Morningstar Unconstrained |
| Fidelity Contrafund |
Morningstar Unconstrained and Fidelity Contrafund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Unconstrained and Fidelity Contrafund
The main advantage of trading using opposite Morningstar Unconstrained and Fidelity Contrafund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Unconstrained position performs unexpectedly, Fidelity Contrafund 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 Contrafund will offset losses from the drop in Fidelity Contrafund's long position.The idea behind Morningstar Unconstrained Allocation and Fidelity Contrafund K6 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.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Global Correlations Find global opportunities by holding instruments from different markets |