Correlation Between ALPS Clean and Fidelity Covington

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

By analyzing existing cross correlation between ALPS Clean Energy and Fidelity Covington Trust, you can compare the effects of market volatilities on ALPS Clean and Fidelity Covington 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 ALPS Clean with a short position of Fidelity Covington. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPS Clean and Fidelity Covington.

Diversification Opportunities for ALPS Clean and Fidelity Covington

0.97

Correlation Coefficient

ALPS Clean  Fidelity Covington

Almost no diversification

The 3 months correlation between ALPS and Fidelity is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding ALPS Clean Energy and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and ALPS Clean 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 ALPS Clean Energy are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of ALPS Clean i.e., ALPS Clean and Fidelity Covington go up and down completely randomly.

Pair Corralation between ALPS Clean and Fidelity Covington

Given the investment horizon of 90 days ALPS Clean Energy is expected to under-perform the Fidelity Covington. In addition to that, ALPS Clean is 1.36 times more volatile than Fidelity Covington Trust. It trades about -0.05 of its total potential returns per unit of risk. Fidelity Covington Trust is currently generating about -0.05 per unit of volatility. If you would invest  1,608  in Fidelity Covington Trust on April 4, 2024 and sell it today you would lose (176.00) from holding Fidelity Covington Trust or give up 10.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.19%
Values	Daily Returns

ALPS Clean Energy  vs.  Fidelity Covington Trust

ALPS Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, ALPS Clean is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ALPS Clean and Fidelity Covington

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

The idea behind ALPS Clean Energy and Fidelity Covington Trust 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.