Correlation Between TD Comfort and Fidelity Small

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

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

Diversification Opportunities for TD Comfort and Fidelity Small

0.79

Correlation Coefficient

TD Comfort  Fidelity Small

Poor diversification

The 3 months correlation between 0P0001FAU8 and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding TD Comfort Balanced 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 TD Comfort 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 TD Comfort Balanced 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 TD Comfort i.e., TD Comfort and Fidelity Small go up and down completely randomly.

Pair Corralation between TD Comfort and Fidelity Small

Assuming the 90 days trading horizon TD Comfort Balanced is expected to generate 0.74 times more return on investment than Fidelity Small. However, TD Comfort Balanced is 1.35 times less risky than Fidelity Small. It trades about 0.03 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about -0.03 per unit of risk. If you would invest  1,295  in TD Comfort Balanced on December 27, 2024 and sell it today you would earn a total of  9.00  from holding TD Comfort Balanced or generate 0.69% return on investment over 90 days.

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

TD Comfort Balanced  vs.  Fidelity Small Cap

TD Comfort Balanced

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TD Comfort Balanced are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable technical and fundamental indicators, TD Comfort is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Small Cap has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with TD Comfort and Fidelity Small

The main advantage of trading using opposite TD Comfort and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Comfort 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 TD Comfort Balanced 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.