Correlation Between Fidelity Corporate and IShares Core

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

By analyzing existing cross correlation between Fidelity Corporate Bond and iShares Core Aggregate, you can compare the effects of market volatilities on Fidelity Corporate and IShares Core 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 Fidelity Corporate with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Corporate and IShares Core.

Diversification Opportunities for Fidelity Corporate and IShares Core

0.88

Correlation Coefficient

Fidelity Corporate  IShares Core

Very poor diversification

The 3 months correlation between Fidelity and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Corporate Bond and iShares Core Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggregate and Fidelity Corporate 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 Fidelity Corporate Bond are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Aggregate has no effect on the direction of Fidelity Corporate i.e., Fidelity Corporate and IShares Core go up and down completely randomly.

Pair Corralation between Fidelity Corporate and IShares Core

Given the investment horizon of 90 days Fidelity Corporate Bond is expected to generate 1.01 times more return on investment than IShares Core. However, Fidelity Corporate is 1.01 times more volatile than iShares Core Aggregate. It trades about -0.04 of its potential returns per unit of risk. iShares Core Aggregate is currently generating about -0.07 per unit of risk. If you would invest  4,600  in Fidelity Corporate Bond on February 4, 2024 and sell it today you would lose (20.00) from holding Fidelity Corporate Bond or give up 0.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fidelity Corporate Bond  vs.  iShares Core Aggregate

Fidelity Corporate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Corporate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fidelity Corporate is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

iShares Core Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fidelity Corporate and IShares Core

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

The idea behind Fidelity Corporate Bond and iShares Core Aggregate 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.