Correlation Between Fidelity Puritan and Aggressive Growth

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

By analyzing existing cross correlation between Fidelity Puritan Fund and Aggressive Growth Allocation, you can compare the effects of market volatilities on Fidelity Puritan and Aggressive Growth 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 Puritan with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Puritan and Aggressive Growth.

Diversification Opportunities for Fidelity Puritan and Aggressive Growth

0.61

Correlation Coefficient

Fidelity Puritan  Aggressive Growth

Poor diversification

The 3 months correlation between Fidelity and Aggressive is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Puritan Fund and Aggressive Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Fidelity Puritan 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 Puritan Fund are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Fidelity Puritan i.e., Fidelity Puritan and Aggressive Growth go up and down completely randomly.

Pair Corralation between Fidelity Puritan and Aggressive Growth

Assuming the 90 days horizon Fidelity Puritan is expected to generate 1.06 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Fidelity Puritan Fund is 1.04 times less risky than Aggressive Growth. It trades about 0.09 of its potential returns per unit of risk. Aggressive Growth Allocation is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  847.00  in Aggressive Growth Allocation on August 16, 2024 and sell it today you would earn a total of  321.00  from holding Aggressive Growth Allocation or generate 37.9% return on investment over 90 days.

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

Fidelity Puritan Fund  vs.  Aggressive Growth Allocation

Fidelity Puritan

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Puritan Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Puritan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aggressive Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Allocation are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aggressive Growth 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 Puritan and Aggressive Growth

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

The idea behind Fidelity Puritan Fund and Aggressive Growth Allocation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.