Correlation Between Fidelity Limited and SPDR Barclays

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

By analyzing existing cross correlation between Fidelity Limited Term and SPDR Barclays Intermediate, you can compare the effects of market volatilities on Fidelity Limited and SPDR Barclays 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 Limited with a short position of SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Limited and SPDR Barclays.

Diversification Opportunities for Fidelity Limited and SPDR Barclays

0.9

Correlation Coefficient

Fidelity Limited  SPDR Barclays

Almost no diversification

The 3 months correlation between Fidelity and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Limited Term and SPDR Barclays Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Interm and Fidelity Limited 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 Limited Term are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Interm has no effect on the direction of Fidelity Limited i.e., Fidelity Limited and SPDR Barclays go up and down completely randomly.

Pair Corralation between Fidelity Limited and SPDR Barclays

Given the investment horizon of 90 days Fidelity Limited Term is expected to generate 0.58 times more return on investment than SPDR Barclays. However, Fidelity Limited Term is 1.71 times less risky than SPDR Barclays. It trades about -0.06 of its potential returns per unit of risk. SPDR Barclays Intermediate is currently generating about -0.12 per unit of risk. If you would invest  4,875  in Fidelity Limited Term on January 31, 2024 and sell it today you would lose (10.00) from holding Fidelity Limited Term or give up 0.21% of portfolio value over 90 days.

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

Fidelity Limited Term  vs.  SPDR Barclays Intermediate

Fidelity Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Limited Term has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity Limited is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SPDR Barclays Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Limited and SPDR Barclays

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

The idea behind Fidelity Limited Term and SPDR Barclays Intermediate 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.