Correlation Between Fidelity Small and Fidelity International

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

Diversification Opportunities for Fidelity Small and Fidelity International

-0.1

Correlation Coefficient

Fidelity Small  Fidelity International

Good diversification

The 3 months correlation between Fidelity and Fidelity is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Fidelity International Discove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Fidelity Small i.e., Fidelity Small and Fidelity International go up and down completely randomly.

Pair Corralation between Fidelity Small and Fidelity International

Assuming the 90 days horizon Fidelity Small Cap is expected to generate 1.32 times more return on investment than Fidelity International. However, Fidelity Small is 1.32 times more volatile than Fidelity International Discovery. It trades about 0.13 of its potential returns per unit of risk. Fidelity International Discovery is currently generating about -0.02 per unit of risk. If you would invest  1,857  in Fidelity Small Cap on September 3, 2024 and sell it today you would earn a total of  176.00  from holding Fidelity Small Cap or generate 9.48% return on investment over 90 days.

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

Fidelity Small Cap  vs.  Fidelity International Discove

Fidelity Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap 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 Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity International Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Small and Fidelity International

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

The idea behind Fidelity Small Cap and Fidelity International Discovery 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 Commodity Directory module to find actively traded commodities issued by global exchanges.