Correlation Between Fidelity Value and Fidelity Capital

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

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

Diversification Opportunities for Fidelity Value and Fidelity Capital

0.9

Correlation Coefficient

Fidelity Value  Fidelity Capital

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Fund and Fidelity Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Capital App and Fidelity Value 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 Value Fund are associated (or correlated) with Fidelity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Capital App has no effect on the direction of Fidelity Value i.e., Fidelity Value and Fidelity Capital go up and down completely randomly.

Pair Corralation between Fidelity Value and Fidelity Capital

Assuming the 90 days horizon Fidelity Value Fund is expected to generate 1.16 times more return on investment than Fidelity Capital. However, Fidelity Value is 1.16 times more volatile than Fidelity Capital Appreciation. It trades about 0.18 of its potential returns per unit of risk. Fidelity Capital Appreciation is currently generating about 0.2 per unit of risk. If you would invest  1,545  in Fidelity Value Fund on September 4, 2024 and sell it today you would earn a total of  160.00  from holding Fidelity Value Fund or generate 10.36% return on investment over 90 days.

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

Fidelity Value Fund  vs.  Fidelity Capital Appreciation

Fidelity Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Value Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Fidelity Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Capital App

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Capital Appreciation are ranked lower than 15 (%) 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.

Pair Trading with Fidelity Value and Fidelity Capital

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

The idea behind Fidelity Value Fund and Fidelity Capital Appreciation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.