Correlation Between Dimensional International and Fidelity Small
Can any of the company-specific risk be diversified away by investing in both Dimensional International 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 Dimensional International and Fidelity Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional International High and Fidelity Small Mid Cap, you can compare the effects of market volatilities on Dimensional International 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 Dimensional International with a short position of Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Fidelity Small.
Diversification Opportunities for Dimensional International and Fidelity Small
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and Fidelity is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and Fidelity Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Small Mid and Dimensional International 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 International High 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 Mid has no effect on the direction of Dimensional International i.e., Dimensional International and Fidelity Small go up and down completely randomly.
Pair Corralation between Dimensional International and Fidelity Small
Given the investment horizon of 90 days Dimensional International is expected to generate 3.24 times less return on investment than Fidelity Small. But when comparing it to its historical volatility, Dimensional International High is 1.3 times less risky than Fidelity Small. It trades about 0.05 of its potential returns per unit of risk. Fidelity Small Mid Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,198 in Fidelity Small Mid Cap on September 2, 2024 and sell it today you would earn a total of 739.00 from holding Fidelity Small Mid Cap or generate 33.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International High vs. Fidelity Small Mid Cap
Performance |
| Timeline |
| Dimensional International |
| Fidelity Small Mid |
Dimensional International and Fidelity Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and Fidelity Small
The main advantage of trading using opposite Dimensional International and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International 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 Dimensional International High and Fidelity Small Mid 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.
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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