Correlation Between Fidelity Small and Small Cap
Can any of the company-specific risk be diversified away by investing in both Fidelity Small and Small Cap 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 Fidelity Small and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Small Cap and Small Cap Equity, you can compare the effects of market volatilities on Fidelity Small and Small Cap 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 Fidelity Small with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and Small Cap.
Diversification Opportunities for Fidelity Small and Small Cap
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Small is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Fidelity Small 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 Fidelity Small Cap are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Fidelity Small i.e., Fidelity Small and Small Cap go up and down completely randomly.
Pair Corralation between Fidelity Small and Small Cap
Assuming the 90 days horizon Fidelity Small is expected to generate 1.44 times less return on investment than Small Cap. In addition to that, Fidelity Small is 1.04 times more volatile than Small Cap Equity. It trades about 0.07 of its total potential returns per unit of risk. Small Cap Equity is currently generating about 0.11 per unit of volatility. If you would invest 1,732 in Small Cap Equity on September 1, 2024 and sell it today you would earn a total of 299.00 from holding Small Cap Equity or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Small Cap vs. Small Cap Equity
Performance |
| Timeline |
| Fidelity Small Cap |
| Small Cap Equity |
Fidelity Small and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Small and Small Cap
The main advantage of trading using opposite Fidelity Small and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Fidelity Small vs. Cref Inflation Linked Bond | Fidelity Small vs. Guidepath Managed Futures | Fidelity Small vs. Ab Bond Inflation | Fidelity Small vs. Fidelity Advisor 529 |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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