Correlation Between Fidelity Small and Tax Managed

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

Diversification Opportunities for Fidelity Small and Tax Managed

0.99

Correlation Coefficient

Fidelity Small  Tax Managed

No risk reduction

The 3 months correlation between Fidelity and Tax is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Tax Managed Mid Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Mid 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 Tax Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Mid has no effect on the direction of Fidelity Small i.e., Fidelity Small and Tax Managed go up and down completely randomly.

Pair Corralation between Fidelity Small and Tax Managed

Assuming the 90 days horizon Fidelity Small Cap is expected to generate 1.1 times more return on investment than Tax Managed. However, Fidelity Small is 1.1 times more volatile than Tax Managed Mid Small. It trades about -0.1 of its potential returns per unit of risk. Tax Managed Mid Small is currently generating about -0.11 per unit of risk. If you would invest  2,829  in Fidelity Small Cap on December 25, 2024 and sell it today you would lose (203.00) from holding Fidelity Small Cap or give up 7.18% of portfolio value over 90 days.

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

Fidelity Small Cap  vs.  Tax Managed Mid Small

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Tax Managed Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Managed Mid Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Small and Tax Managed

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

The idea behind Fidelity Small Cap and Tax Managed Mid Small 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.