Correlation Between Fidelity Select and Technology Portfolio

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

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

Diversification Opportunities for Fidelity Select and Technology Portfolio

0.99

Correlation Coefficient

Fidelity Select  Technology Portfolio

No risk reduction

The 3 months correlation between Fidelity and Technology is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Select Semiconductors and Technology Portfolio Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Portfolio and Fidelity Select 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 Select Semiconductors are associated (or correlated) with Technology Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Portfolio has no effect on the direction of Fidelity Select i.e., Fidelity Select and Technology Portfolio go up and down completely randomly.

Pair Corralation between Fidelity Select and Technology Portfolio

Assuming the 90 days horizon Fidelity Select Semiconductors is expected to under-perform the Technology Portfolio. In addition to that, Fidelity Select is 1.3 times more volatile than Technology Portfolio Technology. It trades about -0.05 of its total potential returns per unit of risk. Technology Portfolio Technology is currently generating about -0.04 per unit of volatility. If you would invest  3,542  in Technology Portfolio Technology on February 3, 2025 and sell it today you would lose (326.00) from holding Technology Portfolio Technology or give up 9.2% of portfolio value over 90 days.

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

Fidelity Select Semiconductors  vs.  Technology Portfolio Technolog

Fidelity Select Semi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Select Semiconductors has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Technology Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Portfolio Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Select and Technology Portfolio

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

The idea behind Fidelity Select Semiconductors and Technology Portfolio Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.