Correlation Between Fidelity Small and Meridian Small
Can any of the company-specific risk be diversified away by investing in both Fidelity Small and Meridian 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 Fidelity Small and Meridian Small 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 Meridian Small Cap, you can compare the effects of market volatilities on Fidelity Small and Meridian 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 Fidelity Small with a short position of Meridian Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and Meridian Small.
Diversification Opportunities for Fidelity Small and Meridian Small
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Meridian is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Meridian Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Small Cap 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 Meridian Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Small Cap has no effect on the direction of Fidelity Small i.e., Fidelity Small and Meridian Small go up and down completely randomly.
Pair Corralation between Fidelity Small and Meridian Small
Assuming the 90 days horizon Fidelity Small Cap is expected to generate 1.06 times more return on investment than Meridian Small. However, Fidelity Small is 1.06 times more volatile than Meridian Small Cap. It trades about 0.12 of its potential returns per unit of risk. Meridian Small Cap is currently generating about 0.09 per unit of risk. If you would invest 2,525 in Fidelity Small Cap on August 26, 2024 and sell it today you would earn a total of 1,126 from holding Fidelity Small Cap or generate 44.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Small Cap vs. Meridian Small Cap
Performance |
| Timeline |
| Fidelity Small Cap |
| Meridian Small Cap |
Fidelity Small and Meridian Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Small and Meridian Small
The main advantage of trading using opposite Fidelity Small and Meridian Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small position performs unexpectedly, Meridian 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 Meridian Small will offset losses from the drop in Meridian Small's long position.| Fidelity Small vs. Fidelity Small Cap | Fidelity Small vs. Fidelity Small Cap | Fidelity Small vs. Fidelity Small Cap | Fidelity Small vs. Fidelity Small Cap |
| Meridian Small vs. Meridian Small Cap | Meridian Small vs. Meridian Small Cap | Meridian Small vs. Meridian Small Cap | Meridian Small vs. Fidelity Small Cap |
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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