Correlation Between Fidelity Small and Fidelity Trend

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

Diversification Opportunities for Fidelity Small and Fidelity Trend

0.92

Correlation Coefficient

Fidelity Small  Fidelity Trend

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend 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 Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of Fidelity Small i.e., Fidelity Small and Fidelity Trend go up and down completely randomly.

Pair Corralation between Fidelity Small and Fidelity Trend

Assuming the 90 days horizon Fidelity Small is expected to generate 1.79 times less return on investment than Fidelity Trend. But when comparing it to its historical volatility, Fidelity Small Cap is 1.14 times less risky than Fidelity Trend. It trades about 0.08 of its potential returns per unit of risk. Fidelity Trend Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,317  in Fidelity Trend Fund on September 19, 2024 and sell it today you would earn a total of  11,564  from holding Fidelity Trend Fund or generate 112.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Fidelity Small Cap  vs.  Fidelity Trend Fund

Fidelity Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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 Trend

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Trend Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Trend showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Small and Fidelity Trend

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

The idea behind Fidelity Small Cap and Fidelity Trend Fund 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.