Correlation Between Fidelity Small and Royce Micro-cap
Can any of the company-specific risk be diversified away by investing in both Fidelity Small and Royce Micro-cap 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 Royce Micro-cap 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 Royce Micro Cap Fund, you can compare the effects of market volatilities on Fidelity Small and Royce Micro-cap 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 Royce Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and Royce Micro-cap.
Diversification Opportunities for Fidelity Small and Royce Micro-cap
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Royce is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Royce Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Micro 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 Royce Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Micro Cap has no effect on the direction of Fidelity Small i.e., Fidelity Small and Royce Micro-cap go up and down completely randomly.
Pair Corralation between Fidelity Small and Royce Micro-cap
Assuming the 90 days horizon Fidelity Small is expected to generate 1.41 times less return on investment than Royce Micro-cap. But when comparing it to its historical volatility, Fidelity Small Cap is 1.02 times less risky than Royce Micro-cap. It trades about 0.21 of its potential returns per unit of risk. Royce Micro Cap Fund is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,183 in Royce Micro Cap Fund on August 28, 2024 and sell it today you would earn a total of 127.00 from holding Royce Micro Cap Fund or generate 10.74% 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 Cap vs. Royce Micro Cap Fund
Performance |
| Timeline |
| Fidelity Small Cap |
| Royce Micro Cap |
Fidelity Small and Royce Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Small and Royce Micro-cap
The main advantage of trading using opposite Fidelity Small and Royce Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small position performs unexpectedly, Royce Micro-cap 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 Royce Micro-cap will offset losses from the drop in Royce Micro-cap's long position.| Fidelity Small vs. Fidelity Mid Cap | Fidelity Small vs. Fidelity International Index | Fidelity Small vs. Fidelity Bond Index | Fidelity Small vs. Fidelity Large Cap |
| Royce Micro-cap vs. T Rowe Price | Royce Micro-cap vs. Strategic Allocation Aggressive | Royce Micro-cap vs. Real Estate Fund | Royce Micro-cap vs. High Yield 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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