Correlation Between WisdomTree and Fidelity Quality

Can any of the company-specific risk be diversified away by investing in both WisdomTree and Fidelity Quality 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 WisdomTree and Fidelity Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree SP 500 and Fidelity Quality Income, you can compare the effects of market volatilities on WisdomTree and Fidelity Quality 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 WisdomTree with a short position of Fidelity Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and Fidelity Quality.

Diversification Opportunities for WisdomTree and Fidelity Quality

0.99

Correlation Coefficient

WisdomTree  Fidelity Quality

No risk reduction

The 3 months correlation between WisdomTree and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and Fidelity Quality Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Quality Income and WisdomTree 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 WisdomTree SP 500 are associated (or correlated) with Fidelity Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Quality Income has no effect on the direction of WisdomTree i.e., WisdomTree and Fidelity Quality go up and down completely randomly.

Pair Corralation between WisdomTree and Fidelity Quality

Assuming the 90 days trading horizon WisdomTree SP 500 is expected to generate 2.97 times more return on investment than Fidelity Quality. However, WisdomTree is 2.97 times more volatile than Fidelity Quality Income. It trades about 0.31 of its potential returns per unit of risk. Fidelity Quality Income is currently generating about 0.26 per unit of risk. If you would invest  590,950  in WisdomTree SP 500 on April 23, 2025 and sell it today you would earn a total of  313,250  from holding WisdomTree SP 500 or generate 53.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

WisdomTree SP 500  vs.  Fidelity Quality Income

WisdomTree SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Quality Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Quality Income are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fidelity Quality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree and Fidelity Quality

The main advantage of trading using opposite WisdomTree and Fidelity Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, Fidelity Quality 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 Quality will offset losses from the drop in Fidelity Quality's long position.

The idea behind WisdomTree SP 500 and Fidelity Quality Income 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.