Correlation Between Sparta Capital and Fidelity Small

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

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

Diversification Opportunities for Sparta Capital and Fidelity Small

-0.59

Correlation Coefficient

Sparta Capital  Fidelity Small

Excellent diversification

The 3 months correlation between Sparta and Fidelity is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital 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 Sparta Capital 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 Sparta Capital 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 Sparta Capital i.e., Sparta Capital and Fidelity Small go up and down completely randomly.

Pair Corralation between Sparta Capital and Fidelity Small

Assuming the 90 days horizon Sparta Capital is expected to under-perform the Fidelity Small. In addition to that, Sparta Capital is 2.67 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 0.2 per unit of volatility. If you would invest  3,221  in Fidelity Small Cap on September 4, 2024 and sell it today you would earn a total of  465.00  from holding Fidelity Small Cap or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Sparta Capital  vs.  Fidelity Small Cap

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fidelity Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparta Capital and Fidelity Small

The main advantage of trading using opposite Sparta Capital and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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 Sparta Capital 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.