Correlation Between Fidelity Stock and Fidelity Small

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

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

Diversification Opportunities for Fidelity Stock and Fidelity Small

0.99

Correlation Coefficient

Fidelity Stock  Fidelity Small

No risk reduction

The 3 months correlation between Fidelity and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Stock Selector 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 Fidelity Stock 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 Stock Selector 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 Fidelity Stock i.e., Fidelity Stock and Fidelity Small go up and down completely randomly.

Pair Corralation between Fidelity Stock and Fidelity Small

Assuming the 90 days horizon Fidelity Stock is expected to generate 1.28 times less return on investment than Fidelity Small. In addition to that, Fidelity Stock is 1.01 times more volatile than Fidelity Small Cap. It trades about 0.13 of its total potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.17 per unit of volatility. If you would invest  3,195  in Fidelity Small Cap on September 12, 2024 and sell it today you would earn a total of  393.00  from holding Fidelity Small Cap or generate 12.3% return on investment over 90 days.

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

Fidelity Stock Selector  vs.  Fidelity Small Cap

Fidelity Stock Selector

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Stock Selector are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity Stock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Stock and Fidelity Small

The main advantage of trading using opposite Fidelity Stock and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Stock 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 Fidelity Stock Selector 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.