Correlation Between TD Index and Fidelity Absolute

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

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

Diversification Opportunities for TD Index and Fidelity Absolute

0.94

Correlation Coefficient

TD Index  Fidelity Absolute

Almost no diversification

The 3 months correlation between TDB902 and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding TD Index Fund E and Fidelity Absolute Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Absolute Income and TD Index 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 TD Index Fund E are associated (or correlated) with Fidelity Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Absolute Income has no effect on the direction of TD Index i.e., TD Index and Fidelity Absolute go up and down completely randomly.

Pair Corralation between TD Index and Fidelity Absolute

Assuming the 90 days trading horizon TD Index Fund E is expected to generate 5.72 times more return on investment than Fidelity Absolute. However, TD Index is 5.72 times more volatile than Fidelity Absolute Income. It trades about 0.34 of its potential returns per unit of risk. Fidelity Absolute Income is currently generating about 0.35 per unit of risk. If you would invest  12,547  in TD Index Fund E on April 21, 2025 and sell it today you would earn a total of  2,783  from holding TD Index Fund E or generate 22.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

TD Index Fund E  vs.  Fidelity Absolute Income

TD Index Fund

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund E are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental drivers, TD Index sustained solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Absolute Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Absolute Income are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Fidelity Absolute is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TD Index and Fidelity Absolute

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

The idea behind TD Index Fund E and Fidelity Absolute 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.