Correlation Between Fidelity New and Harbor Small

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

By analyzing existing cross correlation between Fidelity New Millennium and Harbor Small Cap, you can compare the effects of market volatilities on Fidelity New and Harbor Small 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 New with a short position of Harbor Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity New and Harbor Small.

Diversification Opportunities for Fidelity New and Harbor Small

0.94

Correlation Coefficient

Fidelity New  Harbor Small

Almost no diversification

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

Pair Corralation between Fidelity New and Harbor Small

Assuming the 90 days horizon Fidelity New is expected to generate 1.04 times less return on investment than Harbor Small. But when comparing it to its historical volatility, Fidelity New Millennium is 1.5 times less risky than Harbor Small. It trades about 0.31 of its potential returns per unit of risk. Harbor Small Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,391  in Harbor Small Cap on September 6, 2024 and sell it today you would earn a total of  208.00  from holding Harbor Small Cap or generate 14.95% return on investment over 90 days.

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

Fidelity New Millennium  vs.  Harbor Small Cap

Fidelity New Millennium

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity New Millennium are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Fidelity New showed solid returns over the last few months and may actually be approaching a breakup point.

Harbor Small Cap

Risk-Adjusted Performance

16 of 100

Good

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

Pair Trading with Fidelity New and Harbor Small

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

The idea behind Fidelity New Millennium and Harbor Small Cap 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.