Correlation Between Fidelity Small and Fidelity Global

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

Diversification Opportunities for Fidelity Small and Fidelity Global

0.86

Correlation Coefficient

Fidelity Small  Fidelity Global

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Fidelity Global Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Global Inno 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Global Inno has no effect on the direction of Fidelity Small i.e., Fidelity Small and Fidelity Global go up and down completely randomly.

Pair Corralation between Fidelity Small and Fidelity Global

Assuming the 90 days trading horizon Fidelity Small is expected to generate 3.78 times less return on investment than Fidelity Global. But when comparing it to its historical volatility, Fidelity Small Cap is 2.56 times less risky than Fidelity Global. It trades about 0.16 of its potential returns per unit of risk. Fidelity Global Innovators is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,537  in Fidelity Global Innovators on September 2, 2024 and sell it today you would earn a total of  505.00  from holding Fidelity Global Innovators or generate 14.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Fidelity Small Cap  vs.  Fidelity Global Innovators

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.

Fidelity Global Inno

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Global Innovators are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, Fidelity Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Small and Fidelity Global

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

The idea behind Fidelity Small Cap and Fidelity Global Innovators 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.