Correlation Between Fidelity Small and Fidelity Diversified

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

Diversification Opportunities for Fidelity Small and Fidelity Diversified

-0.34

Correlation Coefficient

Fidelity Small  Fidelity Diversified

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap 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 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 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 Small i.e., Fidelity Small and Fidelity Diversified go up and down completely randomly.

Pair Corralation between Fidelity Small and Fidelity Diversified

Assuming the 90 days horizon Fidelity Small Cap is expected to under-perform the Fidelity Diversified. In addition to that, Fidelity Small is 1.16 times more volatile than Fidelity Diversified International. It trades about -0.04 of its total potential returns per unit of risk. Fidelity Diversified International is currently generating about 0.13 per unit of volatility. If you would invest  4,220  in Fidelity Diversified International on December 28, 2024 and sell it today you would earn a total of  321.00  from holding Fidelity Diversified International or generate 7.61% return on investment over 90 days.

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

Fidelity Small Cap  vs.  Fidelity Diversified Internati

Fidelity Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong 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 Diversified

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Diversified International are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Diversified may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fidelity Small and Fidelity Diversified

The main advantage of trading using opposite Fidelity Small and Fidelity Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small 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 Small Cap 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.