Correlation Between IpathB SP and Fidelity Info

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Can any of the company-specific risk be diversified away by investing in both IpathB SP and Fidelity Info 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 IpathB SP and Fidelity Info into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IpathB SP 500 and Fidelity Info Tech, you can compare the effects of market volatilities on IpathB SP and Fidelity Info 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 IpathB SP with a short position of Fidelity Info. Check out your portfolio center. Please also check ongoing floating volatility patterns of IpathB SP and Fidelity Info.

Diversification Opportunities for IpathB SP and Fidelity Info

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 24 months correlation between IpathB and Fidelity is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding IpathB SP 500 and Fidelity Info Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Info Tech and IpathB SP 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 IpathB SP 500 are associated (or correlated) with Fidelity Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Info Tech has no effect on the direction of IpathB SP i.e., IpathB SP and Fidelity Info go up and down completely randomly.

Pair Corralation between IpathB SP and Fidelity Info

Considering the 90-day investment horizon IpathB SP 500 is expected to under-perform the Fidelity Info. In addition to that, IpathB SP is 2.74 times more volatile than Fidelity Info Tech. It trades about -0.05 of its total potential returns per unit of risk. Fidelity Info Tech is currently generating about 0.03 per unit of volatility. If you would invest  9,423  in Fidelity Info Tech on May 19, 2022 and sell it today you would earn a total of  2,103  from holding Fidelity Info Tech or generate 22.32% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

IpathB SP 500  vs.  Fidelity Info Tech

 Performance (%) 
       Timeline  
IpathB SP 500 
IpathB Performance
0 of 100
Over the last 90 days IpathB SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the ETF investors.

IpathB Price Channel

Fidelity Info Tech 
Fidelity Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Info Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Fidelity Info is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Price Channel

IpathB SP and Fidelity Info Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IpathB SP and Fidelity Info

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

IpathB SP 500

Pair trading matchups for IpathB SP

Citigroup vs. IpathB SP
Invesco Solar vs. IpathB SP
Lam Research vs. IpathB SP
Johnson Johnson vs. IpathB SP
Salesforce vs. IpathB SP
Nio Inc vs. IpathB SP
Main Street vs. IpathB SP
Sentinelone Inc vs. IpathB SP
Bristol-Myers Squibb vs. IpathB SP
B of A vs. IpathB SP
Zimmer Biomet vs. IpathB SP
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against IpathB SP as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. IpathB SP's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, IpathB SP's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to IpathB SP 500.
The idea behind IpathB SP 500 and Fidelity Info Tech 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.

Fidelity Info Tech

Pair trading matchups for Fidelity Info

Goldman Sachs vs. Fidelity Info
Otp Bank vs. Fidelity Info
Main Street vs. Fidelity Info
B of A vs. Fidelity Info
T Rowe vs. Fidelity Info
Invesco Solar vs. Fidelity Info
Stryker Corp vs. Fidelity Info
Sentinelone Inc vs. Fidelity Info
Dupont Denemours vs. Fidelity Info
Johnson Johnson vs. Fidelity Info
Nio Inc vs. Fidelity Info
Zimmer Biomet vs. Fidelity Info
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Fidelity Info as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Fidelity Info's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Fidelity Info's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Fidelity Info Tech.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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