Correlation Between Fidelity Capital and Fidelity Diversified

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

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

Diversification Opportunities for Fidelity Capital and Fidelity Diversified

-0.35

Correlation Coefficient

Fidelity Capital  Fidelity Diversified

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Capital Appreciation and Fidelity Diversified Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Diversified and Fidelity 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 Fidelity Capital Appreciation are associated (or correlated) with Fidelity Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Diversified has no effect on the direction of Fidelity Capital i.e., Fidelity Capital and Fidelity Diversified go up and down completely randomly.

Pair Corralation between Fidelity Capital and Fidelity Diversified

Assuming the 90 days horizon Fidelity Capital Appreciation is expected to generate 1.0 times more return on investment than Fidelity Diversified. However, Fidelity Capital Appreciation is 1.0 times less risky than Fidelity Diversified. It trades about 0.08 of its potential returns per unit of risk. Fidelity Diversified International is currently generating about 0.02 per unit of risk. If you would invest  4,702  in Fidelity Capital Appreciation on September 15, 2024 and sell it today you would earn a total of  426.00  from holding Fidelity Capital Appreciation or generate 9.06% return on investment over 90 days.

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

Fidelity Capital Appreciation  vs.  Fidelity Diversified Internati

Fidelity Capital App

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Capital Appreciation are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Diversified International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Diversified 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 Capital and Fidelity Diversified

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

The idea behind Fidelity Capital Appreciation and Fidelity Diversified International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.