Correlation Between Equity Income and Fidelity Small
Can any of the company-specific risk be diversified away by investing in both Equity Income 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 Equity Income and Fidelity Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Fidelity Small Cap, you can compare the effects of market volatilities on Equity Income 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 Equity Income with a short position of Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Fidelity Small.
Diversification Opportunities for Equity Income and Fidelity Small
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Fidelity Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Small Cap and Equity Income 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 Equity Income Fund 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 Cap has no effect on the direction of Equity Income i.e., Equity Income and Fidelity Small go up and down completely randomly.
Pair Corralation between Equity Income and Fidelity Small
Assuming the 90 days horizon Equity Income is expected to generate 1.69 times less return on investment than Fidelity Small. But when comparing it to its historical volatility, Equity Income Fund is 1.54 times less risky than Fidelity Small. It trades about 0.07 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,125 in Fidelity Small Cap on September 14, 2024 and sell it today you would earn a total of 618.00 from holding Fidelity Small Cap or generate 29.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Fidelity Small Cap
Performance |
| Timeline |
| Equity Income |
| Fidelity Small Cap |
Equity Income and Fidelity Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Fidelity Small
The main advantage of trading using opposite Equity Income and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income 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.| Equity Income vs. Fidelity Small Cap | Equity Income vs. Vanguard Small Cap Value | Equity Income vs. John Hancock Ii | Equity Income vs. Boston Partners Small |
| Fidelity Small vs. Fidelity Large Cap | Fidelity Small vs. Fidelity Small Cap | Fidelity Small vs. Fidelity Mid Cap | Fidelity Small vs. Fidelity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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