Correlation Between Fidelity Small and Fidelity Momentum
Can any of the company-specific risk be diversified away by investing in both Fidelity Small and Fidelity Momentum 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 Fidelity Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Small Mid Factor and Fidelity Momentum Factor, you can compare the effects of market volatilities on Fidelity Small and Fidelity Momentum 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 Fidelity Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and Fidelity Momentum.
Diversification Opportunities for Fidelity Small and Fidelity Momentum
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Mid Factor and Fidelity Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum Factor 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 Mid Factor are associated (or correlated) with Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum Factor has no effect on the direction of Fidelity Small i.e., Fidelity Small and Fidelity Momentum go up and down completely randomly.
Pair Corralation between Fidelity Small and Fidelity Momentum
Given the investment horizon of 90 days Fidelity Small Mid Factor is expected to generate 1.21 times more return on investment than Fidelity Momentum. However, Fidelity Small is 1.21 times more volatile than Fidelity Momentum Factor. It trades about 0.27 of its potential returns per unit of risk. Fidelity Momentum Factor is currently generating about 0.25 per unit of risk. If you would invest 4,143 in Fidelity Small Mid Factor on August 29, 2024 and sell it today you would earn a total of 327.00 from holding Fidelity Small Mid Factor or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Small Mid Factor vs. Fidelity Momentum Factor
Performance |
| Timeline |
| Fidelity Small Mid |
| Fidelity Momentum Factor |
Fidelity Small and Fidelity Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Small and Fidelity Momentum
The main advantage of trading using opposite Fidelity Small and Fidelity Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small position performs unexpectedly, Fidelity Momentum 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 Momentum will offset losses from the drop in Fidelity Momentum's long position.| Fidelity Small vs. Fidelity Emerging Markets | Fidelity Small vs. Fidelity International Multifactor | Fidelity Small vs. Fidelity Quality Factor | Fidelity Small vs. Fidelity Low Volatility |
| Fidelity Momentum vs. FT Vest Equity | Fidelity Momentum vs. Northern Lights | Fidelity Momentum vs. Dimensional International High | Fidelity Momentum vs. First Trust Exchange Traded |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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