Correlation Between Fidelity Large and Permanent Portfolio

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

By analyzing existing cross correlation between Fidelity Large Cap and Permanent Portfolio Class, you can compare the effects of market volatilities on Fidelity Large and Permanent Portfolio 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 Large with a short position of Permanent Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Large and Permanent Portfolio.

Diversification Opportunities for Fidelity Large and Permanent Portfolio

0.97

Correlation Coefficient

Fidelity Large  Permanent Portfolio

Almost no diversification

The 3 months correlation between Fidelity and Permanent is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Large Cap and Permanent Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permanent Portfolio Class and Fidelity Large 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 Large Cap are associated (or correlated) with Permanent Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permanent Portfolio Class has no effect on the direction of Fidelity Large i.e., Fidelity Large and Permanent Portfolio go up and down completely randomly.

Pair Corralation between Fidelity Large and Permanent Portfolio

Assuming the 90 days horizon Fidelity Large Cap is expected to generate 1.82 times more return on investment than Permanent Portfolio. However, Fidelity Large is 1.82 times more volatile than Permanent Portfolio Class. It trades about 0.32 of its potential returns per unit of risk. Permanent Portfolio Class is currently generating about 0.18 per unit of risk. If you would invest  1,493  in Fidelity Large Cap on May 3, 2025 and sell it today you would earn a total of  214.00  from holding Fidelity Large Cap or generate 14.33% return on investment over 90 days.

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

Fidelity Large Cap  vs.  Permanent Portfolio Class

Fidelity Large Cap

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Fidelity Large showed solid returns over the last few months and may actually be approaching a breakup point.

Permanent Portfolio Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Permanent Portfolio Class are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Permanent Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Large and Permanent Portfolio

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

The idea behind Fidelity Large Cap and Permanent Portfolio Class 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.

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.