Correlation Between Fidelity 500 and Capital World
Can any of the company-specific risk be diversified away by investing in both Fidelity 500 and Capital World 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 500 and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity 500 Index and Capital World Growth, you can compare the effects of market volatilities on Fidelity 500 and Capital World 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 500 with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity 500 and Capital World.
Diversification Opportunities for Fidelity 500 and Capital World
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Capital is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity 500 Index and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Fidelity 500 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 500 Index are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Fidelity 500 i.e., Fidelity 500 and Capital World go up and down completely randomly.
Pair Corralation between Fidelity 500 and Capital World
Assuming the 90 days horizon Fidelity 500 Index is expected to under-perform the Capital World. In addition to that, Fidelity 500 is 1.09 times more volatile than Capital World Growth. It trades about -0.21 of its total potential returns per unit of risk. Capital World Growth is currently generating about -0.18 per unit of volatility. If you would invest 6,404 in Capital World Growth on January 19, 2024 and sell it today you would lose (160.00) from holding Capital World Growth or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity 500 Index vs. Capital World Growth
Performance |
| Timeline |
| Fidelity 500 Index |
| Capital World Growth |
Fidelity 500 and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity 500 and Capital World
The main advantage of trading using opposite Fidelity 500 and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 500 position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Fidelity 500 vs. Vanguard Total Stock | Fidelity 500 vs. Vanguard 500 Index | Fidelity 500 vs. Vanguard Total Stock | Fidelity 500 vs. Vanguard Total Stock |
| Capital World vs. Commonwealth Real Estate | Capital World vs. Gamco Global Opportunity | Capital World vs. HUMANA INC | Capital World vs. Aquagold International |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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