Correlation Between Absolute Convertible and Fidelity Sustainable

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

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

Diversification Opportunities for Absolute Convertible and Fidelity Sustainable

-0.46

Correlation Coefficient

Absolute Convertible  Fidelity Sustainable

Very good diversification

The 3 months correlation between Absolute and Fidelity is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Fidelity Sustainable Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Sustainable and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Fidelity Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Sustainable has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Fidelity Sustainable go up and down completely randomly.

Pair Corralation between Absolute Convertible and Fidelity Sustainable

Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.04 times more return on investment than Fidelity Sustainable. However, Absolute Convertible Arbitrage is 22.27 times less risky than Fidelity Sustainable. It trades about 0.34 of its potential returns per unit of risk. Fidelity Sustainable Target is currently generating about -0.03 per unit of risk. If you would invest  1,125  in Absolute Convertible Arbitrage on January 27, 2025 and sell it today you would earn a total of  18.00  from holding Absolute Convertible Arbitrage or generate 1.6% return on investment over 90 days.

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

Absolute Convertible Arbitrage  vs.  Fidelity Sustainable Target

Absolute Convertible

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Convertible Arbitrage are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Sustainable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Sustainable Target has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absolute Convertible and Fidelity Sustainable

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

The idea behind Absolute Convertible Arbitrage and Fidelity Sustainable Target 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.