Correlation Between Fidelity Limited and Invesco BulletShares

Can any of the company-specific risk be diversified away by investing in both Fidelity Limited and Invesco BulletShares 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 Invesco BulletShares 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 Invesco BulletShares 2028, you can compare the effects of market volatilities on Fidelity Limited and Invesco BulletShares 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 Invesco BulletShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Limited and Invesco BulletShares.

Diversification Opportunities for Fidelity Limited and Invesco BulletShares

0.83

Correlation Coefficient

Fidelity Limited  Invesco BulletShares

Very poor diversification

The 3 months correlation between Fidelity and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Limited Term and Invesco BulletShares 2028 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BulletShares 2028 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 Invesco BulletShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BulletShares 2028 has no effect on the direction of Fidelity Limited i.e., Fidelity Limited and Invesco BulletShares go up and down completely randomly.

Pair Corralation between Fidelity Limited and Invesco BulletShares

Given the investment horizon of 90 days Fidelity Limited Term is expected to generate about the same return on investment as Invesco BulletShares 2028. But, Fidelity Limited Term is 1.89 times less risky than Invesco BulletShares. It trades about 0.05 of its potential returns per unit of risk. Invesco BulletShares 2028 is currently generating about 0.03 per unit of risk. If you would invest  1,887  in Invesco BulletShares 2028 on January 31, 2024 and sell it today you would earn a total of  90.00  from holding Invesco BulletShares 2028 or generate 4.77% return on investment over 90 days.

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

Fidelity Limited Term  vs.  Invesco BulletShares 2028

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.

Invesco BulletShares 2028

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco BulletShares 2028 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Invesco BulletShares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity Limited and Invesco BulletShares

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

The idea behind Fidelity Limited Term and Invesco BulletShares 2028 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.