Correlation Between Fidelity Small and New Perspective
Can any of the company-specific risk be diversified away by investing in both Fidelity Small and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Fidelity Small and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and New Perspective.
Diversification Opportunities for Fidelity Small and New Perspective
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and New is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Fidelity Small i.e., Fidelity Small and New Perspective go up and down completely randomly.
Pair Corralation between Fidelity Small and New Perspective
Assuming the 90 days horizon Fidelity Small is expected to generate 1.14 times less return on investment than New Perspective. In addition to that, Fidelity Small is 1.61 times more volatile than New Perspective Fund. It trades about 0.05 of its total potential returns per unit of risk. New Perspective Fund is currently generating about 0.09 per unit of volatility. If you would invest 4,425 in New Perspective Fund on September 14, 2024 and sell it today you would earn a total of 1,851 from holding New Perspective Fund or generate 41.83% 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. New Perspective Fund
Performance |
| Timeline |
| Fidelity Small Cap |
| New Perspective |
Fidelity Small and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Small and New Perspective
The main advantage of trading using opposite Fidelity Small and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.| Fidelity Small vs. Fidelity Large Cap | Fidelity Small vs. Fidelity Small Cap | Fidelity Small vs. Fidelity Mid Cap | Fidelity Small vs. Fidelity Mid Cap |
| New Perspective vs. Income Fund Of | New Perspective vs. New World Fund | New Perspective vs. American Mutual Fund | New Perspective vs. American Mutual Fund |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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