Correlation Between Small Cap and Fidelity Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Fidelity Small 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 Small Cap and Fidelity Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and Fidelity Small Cap, you can compare the effects of market volatilities on Small Cap and Fidelity Small 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 Small Cap with a short position of Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Fidelity Small.
Diversification Opportunities for Small Cap and Fidelity Small
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Fidelity Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Small Cap and Small Cap 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 Small Cap Value Fund are associated (or correlated) with Fidelity Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Fidelity Small go up and down completely randomly.
Pair Corralation between Small Cap and Fidelity Small
Assuming the 90 days horizon Small Cap is expected to generate 1.59 times less return on investment than Fidelity Small. In addition to that, Small Cap is 1.03 times more volatile than Fidelity Small Cap. It trades about 0.02 of its total potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.04 per unit of volatility. If you would invest 2,128 in Fidelity Small Cap on September 28, 2024 and sell it today you would earn a total of 471.00 from holding Fidelity Small Cap or generate 22.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Fund vs. Fidelity Small Cap
Performance |
| Timeline |
| Small Cap Value |
| Fidelity Small Cap |
Small Cap and Fidelity Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Fidelity Small
The main advantage of trading using opposite Small Cap and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Fidelity Small 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 Small will offset losses from the drop in Fidelity Small's long position.The idea behind Small Cap Value Fund and Fidelity Small Cap 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 Small vs. Fidelity Freedom 2015 | Fidelity Small vs. Fidelity Puritan Fund | Fidelity Small vs. Fidelity Puritan Fund | Fidelity Small vs. Fidelity Pennsylvania Municipal |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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