Correlation Between Fidelity Small and North Square

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

Diversification Opportunities for Fidelity Small and North Square

0.98

Correlation Coefficient

Fidelity Small  North Square

Almost no diversification

The 3 months correlation between Fidelity and North is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and North Square Kennedy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Square Kennedy 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 North Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Square Kennedy has no effect on the direction of Fidelity Small i.e., Fidelity Small and North Square go up and down completely randomly.

Pair Corralation between Fidelity Small and North Square

Assuming the 90 days horizon Fidelity Small is expected to generate 1.16 times less return on investment than North Square. But when comparing it to its historical volatility, Fidelity Small Cap is 1.0 times less risky than North Square. It trades about 0.16 of its potential returns per unit of risk. North Square Kennedy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,096  in North Square Kennedy on September 12, 2024 and sell it today you would earn a total of  165.00  from holding North Square Kennedy or generate 15.05% return on investment over 90 days.

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

Fidelity Small Cap  vs.  North Square Kennedy

Fidelity Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 12 (%) 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.

North Square Kennedy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North Square Kennedy are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, North Square showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Small and North Square

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

The idea behind Fidelity Small Cap and North Square Kennedy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.