Correlation Between Fidelity Small and First Trust
Can any of the company-specific risk be diversified away by investing in both Fidelity Small and First Trust 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 First Trust 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 First Trust SMID, you can compare the effects of market volatilities on Fidelity Small and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and First Trust.
Diversification Opportunities for Fidelity Small and First Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Mid Factor and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SMID has no effect on the direction of Fidelity Small i.e., Fidelity Small and First Trust go up and down completely randomly.
Pair Corralation between Fidelity Small and First Trust
Given the investment horizon of 90 days Fidelity Small Mid Factor is expected to generate 0.89 times more return on investment than First Trust. However, Fidelity Small Mid Factor is 1.13 times less risky than First Trust. It trades about 0.19 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.12 per unit of risk. If you would invest 4,147 in Fidelity Small Mid Factor on November 7, 2024 and sell it today you would earn a total of 140.00 from holding Fidelity Small Mid Factor or generate 3.38% 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. First Trust SMID
Performance |
| Timeline |
| Fidelity Small Mid |
| First Trust SMID |
Fidelity Small and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Small and First Trust
The main advantage of trading using opposite Fidelity Small and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. Matthews China Discovery | First Trust vs. Matthews Emerging Markets | First Trust vs. Morgan Stanley Pathway | First Trust vs. Neuberger Berman ETF |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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