Correlation Between Mid Cap and Fidelity Focused

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

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

Diversification Opportunities for Mid Cap and Fidelity Focused

0.43

Correlation Coefficient

Mid Cap  Fidelity Focused

Very weak diversification

The 3 months correlation between Mid and Fidelity is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Fidelity Focused High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Focused High and Mid Cap 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 Mid Cap Value are associated (or correlated) with Fidelity Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Focused High has no effect on the direction of Mid Cap i.e., Mid Cap and Fidelity Focused go up and down completely randomly.

Pair Corralation between Mid Cap and Fidelity Focused

Assuming the 90 days horizon Mid Cap Value is expected to generate 4.37 times more return on investment than Fidelity Focused. However, Mid Cap is 4.37 times more volatile than Fidelity Focused High. It trades about 0.03 of its potential returns per unit of risk. Fidelity Focused High is currently generating about 0.01 per unit of risk. If you would invest  1,701  in Mid Cap Value on September 17, 2024 and sell it today you would earn a total of  16.00  from holding Mid Cap Value or generate 0.94% return on investment over 90 days.

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

Mid Cap Value  vs.  Fidelity Focused High

Mid Cap Value

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Focused High

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Focused High are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Focused is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Cap and Fidelity Focused

The main advantage of trading using opposite Mid Cap and Fidelity Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Fidelity Focused 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 Focused will offset losses from the drop in Fidelity Focused's long position.

The idea behind Mid Cap Value and Fidelity Focused High 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.