Correlation Between Fidelity Magellan and American Funds

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

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

Diversification Opportunities for Fidelity Magellan and American Funds

0.9

Correlation Coefficient

Fidelity Magellan  American Funds

Almost no diversification

The 3 months correlation between Fidelity and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Magellan Fund and American Funds American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds American and Fidelity Magellan 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 Magellan Fund are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds American has no effect on the direction of Fidelity Magellan i.e., Fidelity Magellan and American Funds go up and down completely randomly.

Pair Corralation between Fidelity Magellan and American Funds

Assuming the 90 days horizon Fidelity Magellan is expected to generate 1.03 times less return on investment than American Funds. In addition to that, Fidelity Magellan is 2.64 times more volatile than American Funds American. It trades about 0.14 of its total potential returns per unit of risk. American Funds American is currently generating about 0.38 per unit of volatility. If you would invest  5,209  in American Funds American on February 16, 2024 and sell it today you would earn a total of  215.00  from holding American Funds American or generate 4.13% return on investment over 90 days.

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

Fidelity Magellan Fund  vs.  American Funds American

Fidelity Magellan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Magellan Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Magellan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds American

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds American are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, American Funds 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 Magellan and American Funds

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

The idea behind Fidelity Magellan Fund and American Funds American 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.