Correlation Between First Trust and Fidelity Small
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Fidelity Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SMID and Fidelity Small Mid Cap, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Fidelity Small.
Diversification Opportunities for First Trust and Fidelity Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SMID 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 First Trust 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 First Trust SMID 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 First Trust i.e., First Trust and Fidelity Small go up and down completely randomly.
Pair Corralation between First Trust and Fidelity Small
Given the investment horizon of 90 days First Trust SMID is expected to generate 0.91 times more return on investment than Fidelity Small. However, First Trust SMID is 1.09 times less risky than Fidelity Small. It trades about 0.25 of its potential returns per unit of risk. Fidelity Small Mid Cap is currently generating about 0.2 per unit of risk. If you would invest 3,511 in First Trust SMID on August 24, 2024 and sell it today you would earn a total of 245.00 from holding First Trust SMID or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SMID vs. Fidelity Small Mid Cap
Performance |
| Timeline |
| First Trust SMID |
| Fidelity Small Mid |
First Trust and Fidelity Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Fidelity Small
The main advantage of trading using opposite First Trust and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. Vanguard Mid Cap Index | First Trust vs. Vanguard Extended Market | First Trust vs. iShares Core SP | First Trust vs. iShares Russell Mid Cap |
| Fidelity Small vs. Vanguard Mid Cap Index | Fidelity Small vs. Vanguard Extended Market | Fidelity Small vs. iShares Core SP | Fidelity Small vs. iShares Russell Mid 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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