Correlation Between Balanced Fund and Fidelity Salem
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Fidelity Salem 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 Balanced Fund and Fidelity Salem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and Fidelity Salem Street, you can compare the effects of market volatilities on Balanced Fund and Fidelity Salem 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 Balanced Fund with a short position of Fidelity Salem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Fidelity Salem.
Diversification Opportunities for Balanced Fund and Fidelity Salem
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Fidelity is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Fidelity Salem Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Salem Street and Balanced Fund 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 Balanced Fund Investor are associated (or correlated) with Fidelity Salem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Salem Street has no effect on the direction of Balanced Fund i.e., Balanced Fund and Fidelity Salem go up and down completely randomly.
Pair Corralation between Balanced Fund and Fidelity Salem
Assuming the 90 days horizon Balanced Fund Investor is expected to under-perform the Fidelity Salem. But the mutual fund apears to be less risky and, when comparing its historical volatility, Balanced Fund Investor is 1.36 times less risky than Fidelity Salem. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Fidelity Salem Street is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,244 in Fidelity Salem Street on November 27, 2024 and sell it today you would earn a total of 65.00 from holding Fidelity Salem Street or generate 5.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Investor vs. Fidelity Salem Street
Performance |
| Timeline |
| Balanced Fund Investor |
| Fidelity Salem Street |
Balanced Fund and Fidelity Salem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Fidelity Salem
The main advantage of trading using opposite Balanced Fund and Fidelity Salem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Fidelity Salem 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 Salem will offset losses from the drop in Fidelity Salem's long position.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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