Correlation Between Fidelity Small and Fidelity ClearPath

Can any of the company-specific risk be diversified away by investing in both Fidelity Small and Fidelity ClearPath 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 Fidelity ClearPath 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 Fidelity ClearPath 2045, you can compare the effects of market volatilities on Fidelity Small and Fidelity ClearPath 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 Fidelity ClearPath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and Fidelity ClearPath.

Diversification Opportunities for Fidelity Small and Fidelity ClearPath

0.55

Correlation Coefficient

Fidelity Small  Fidelity ClearPath

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Fidelity ClearPath 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity ClearPath 2045 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 Fidelity ClearPath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity ClearPath 2045 has no effect on the direction of Fidelity Small i.e., Fidelity Small and Fidelity ClearPath go up and down completely randomly.

Pair Corralation between Fidelity Small and Fidelity ClearPath

Assuming the 90 days trading horizon Fidelity Small is expected to generate 2.02 times less return on investment than Fidelity ClearPath. But when comparing it to its historical volatility, Fidelity Small Cap is 1.66 times less risky than Fidelity ClearPath. It trades about 0.18 of its potential returns per unit of risk. Fidelity ClearPath 2045 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,578  in Fidelity ClearPath 2045 on September 4, 2024 and sell it today you would earn a total of  213.00  from holding Fidelity ClearPath 2045 or generate 8.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Fidelity Small Cap  vs.  Fidelity ClearPath 2045

Fidelity Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 14 (%) 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.

Fidelity ClearPath 2045

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity ClearPath 2045 are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Fidelity ClearPath may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Small and Fidelity ClearPath

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

The idea behind Fidelity Small Cap and Fidelity ClearPath 2045 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.