Correlation Between Fidelity Small and Hotchkis Wiley

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

Diversification Opportunities for Fidelity Small and Hotchkis Wiley

0.65

Correlation Coefficient

Fidelity Small  Hotchkis Wiley

Poor diversification

The 3 months correlation between Fidelity and Hotchkis is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Hotchkis Wiley Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Value 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 Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Value has no effect on the direction of Fidelity Small i.e., Fidelity Small and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Fidelity Small and Hotchkis Wiley

Assuming the 90 days horizon Fidelity Small Cap is expected to generate 0.97 times more return on investment than Hotchkis Wiley. However, Fidelity Small Cap is 1.04 times less risky than Hotchkis Wiley. It trades about 0.13 of its potential returns per unit of risk. Hotchkis Wiley Value is currently generating about -0.01 per unit of risk. If you would invest  2,502  in Fidelity Small Cap on September 12, 2024 and sell it today you would earn a total of  263.00  from holding Fidelity Small Cap or generate 10.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Fidelity Small Cap  vs.  Hotchkis Wiley Value

Fidelity Small Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hotchkis Wiley Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotchkis Wiley Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Hotchkis Wiley 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 Small and Hotchkis Wiley

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

The idea behind Fidelity Small Cap and Hotchkis Wiley Value 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.