Correlation Between Newbury Street and Fidelity Puritan

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

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

Diversification Opportunities for Newbury Street and Fidelity Puritan

0.01

Correlation Coefficient

Newbury Street  Fidelity Puritan

Significant diversification

The 3 months correlation between Newbury and Fidelity is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Newbury Street Acquisition and Fidelity Puritan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Puritan and Newbury Street 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 Newbury Street Acquisition are associated (or correlated) with Fidelity Puritan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Puritan has no effect on the direction of Newbury Street i.e., Newbury Street and Fidelity Puritan go up and down completely randomly.

Pair Corralation between Newbury Street and Fidelity Puritan

Assuming the 90 days horizon Newbury Street Acquisition is expected to generate 29.64 times more return on investment than Fidelity Puritan. However, Newbury Street is 29.64 times more volatile than Fidelity Puritan Fund. It trades about 0.05 of its potential returns per unit of risk. Fidelity Puritan Fund is currently generating about 0.31 per unit of risk. If you would invest  7.69  in Newbury Street Acquisition on February 26, 2024 and sell it today you would lose (0.69) from holding Newbury Street Acquisition or give up 8.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.82%
Values	Daily Returns

Newbury Street Acquisition  vs.  Fidelity Puritan Fund

Newbury Street Acqui

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newbury Street Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Newbury Street showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Puritan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Puritan Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Puritan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Newbury Street and Fidelity Puritan

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

The idea behind Newbury Street Acquisition and Fidelity Puritan Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.