Correlation Between RBC Select and Fidelity Small

Can any of the company-specific risk be diversified away by investing in both RBC Select 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 RBC Select and Fidelity Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RBC Select Balanced and Fidelity Small Cap, you can compare the effects of market volatilities on RBC Select 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 RBC Select with a short position of Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Select and Fidelity Small.

Diversification Opportunities for RBC Select and Fidelity Small

0.89

Correlation Coefficient

RBC Select  Fidelity Small

Very poor diversification

The 3 months correlation between RBC and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding RBC Select Balanced 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 RBC Select 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 RBC Select Balanced 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 RBC Select i.e., RBC Select and Fidelity Small go up and down completely randomly.

Pair Corralation between RBC Select and Fidelity Small

Assuming the 90 days trading horizon RBC Select Balanced is expected to generate 0.99 times more return on investment than Fidelity Small. However, RBC Select Balanced is 1.01 times less risky than Fidelity Small. It trades about 0.23 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.16 per unit of risk. If you would invest  3,351  in RBC Select Balanced on September 3, 2024 and sell it today you would earn a total of  167.00  from holding RBC Select Balanced or generate 4.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

RBC Select Balanced  vs.  Fidelity Small Cap

RBC Select Balanced

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Select Balanced are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Fidelity Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RBC Select and Fidelity Small

The main advantage of trading using opposite RBC Select and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Select 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.

The idea behind RBC Select Balanced and Fidelity Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.