Correlation Between Dimensional ETF and Fidelity Investment

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

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

Diversification Opportunities for Dimensional ETF and Fidelity Investment

0.99

Correlation Coefficient

Dimensional ETF  Fidelity Investment

No risk reduction

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

Pair Corralation between Dimensional ETF and Fidelity Investment

Given the investment horizon of 90 days Dimensional ETF is expected to generate 1.22 times less return on investment than Fidelity Investment. But when comparing it to its historical volatility, Dimensional ETF Trust is 1.43 times less risky than Fidelity Investment. It trades about 0.11 of its potential returns per unit of risk. Fidelity Investment Grade is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,111  in Fidelity Investment Grade on August 29, 2024 and sell it today you would earn a total of  210.00  from holding Fidelity Investment Grade or generate 5.11% return on investment over 90 days.

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

Dimensional ETF Trust  vs.  Fidelity Investment Grade

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Fidelity Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional ETF and Fidelity Investment

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

The idea behind Dimensional ETF Trust and Fidelity Investment Grade 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.