Correlation Between Smallcap World and Fidelity Asset

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

By analyzing existing cross correlation between Smallcap World Fund and Fidelity Asset Manager, you can compare the effects of market volatilities on Smallcap World and Fidelity Asset 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 Smallcap World with a short position of Fidelity Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Fidelity Asset.

Diversification Opportunities for Smallcap World and Fidelity Asset

0.94

Correlation Coefficient

Smallcap World  Fidelity Asset

Almost no diversification

The 3 months correlation between Smallcap and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Fidelity Asset Manager in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Asset Manager and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Fidelity Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Asset Manager has no effect on the direction of Smallcap World i.e., Smallcap World and Fidelity Asset go up and down completely randomly.

Pair Corralation between Smallcap World and Fidelity Asset

Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.69 times more return on investment than Fidelity Asset. However, Smallcap World is 1.69 times more volatile than Fidelity Asset Manager. It trades about 0.03 of its potential returns per unit of risk. Fidelity Asset Manager is currently generating about -0.01 per unit of risk. If you would invest  6,938  in Smallcap World Fund on October 24, 2024 and sell it today you would earn a total of  81.00  from holding Smallcap World Fund or generate 1.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Smallcap World Fund  vs.  Fidelity Asset Manager

Smallcap World

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Smallcap World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Asset Manager

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Smallcap World and Fidelity Asset

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

The idea behind Smallcap World Fund and Fidelity Asset Manager 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.