Correlation Between Fidelity Momentum and Fidelity Total

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

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

Diversification Opportunities for Fidelity Momentum and Fidelity Total

0.07

Correlation Coefficient

Fidelity Momentum  Fidelity Total

Significant diversification

The 3 months correlation between Fidelity and Fidelity is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Momentum Factor 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 Fidelity Momentum 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 Momentum Factor 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 Fidelity Momentum i.e., Fidelity Momentum and Fidelity Total go up and down completely randomly.

Pair Corralation between Fidelity Momentum and Fidelity Total

Given the investment horizon of 90 days Fidelity Momentum Factor is expected to under-perform the Fidelity Total. In addition to that, Fidelity Momentum is 2.61 times more volatile than Fidelity Total Bond. It trades about -0.11 of its total potential returns per unit of risk. Fidelity Total Bond is currently generating about -0.17 per unit of volatility. If you would invest  4,477  in Fidelity Total Bond on January 30, 2024 and sell it today you would lose (68.00) from holding Fidelity Total Bond or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Fidelity Momentum Factor  vs.  Fidelity Total Bond

Fidelity Momentum Factor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Momentum Factor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Fidelity Momentum may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Fidelity Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fidelity Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidelity Momentum and Fidelity Total

The main advantage of trading using opposite Fidelity Momentum and Fidelity Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Momentum 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.

The idea behind Fidelity Momentum Factor and Fidelity Total Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.