Correlation Between Pax High and Fidelity Capital
Can any of the company-specific risk be diversified away by investing in both Pax High and Fidelity Capital 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 Pax High and Fidelity Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pax High Yield and Fidelity Capital Income, you can compare the effects of market volatilities on Pax High and Fidelity Capital 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 Pax High with a short position of Fidelity Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax High and Fidelity Capital.
Diversification Opportunities for Pax High and Fidelity Capital
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pax and Fidelity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pax High Yield and Fidelity Capital Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Capital and Pax High 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 Pax High Yield are associated (or correlated) with Fidelity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Capital has no effect on the direction of Pax High i.e., Pax High and Fidelity Capital go up and down completely randomly.
Pair Corralation between Pax High and Fidelity Capital
Assuming the 90 days horizon Pax High is expected to generate 1.4 times less return on investment than Fidelity Capital. In addition to that, Pax High is 1.01 times more volatile than Fidelity Capital Income. It trades about 0.07 of its total potential returns per unit of risk. Fidelity Capital Income is currently generating about 0.1 per unit of volatility. If you would invest 811.00 in Fidelity Capital Income on January 25, 2024 and sell it today you would earn a total of 165.00 from holding Fidelity Capital Income or generate 20.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pax High Yield vs. Fidelity Capital Income
Performance |
| Timeline |
| Pax High Yield |
| Fidelity Capital |
Pax High and Fidelity Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pax High and Fidelity Capital
The main advantage of trading using opposite Pax High and Fidelity Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax High position performs unexpectedly, Fidelity Capital 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 Capital will offset losses from the drop in Fidelity Capital's long position.The idea behind Pax High Yield and Fidelity Capital 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.| Fidelity Capital vs. Fidelity High Income | Fidelity Capital vs. Fidelity New Markets | Fidelity Capital vs. Fidelity Total Bond | Fidelity Capital vs. Fidelity Balanced Fund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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