Correlation Between Fidelity Focused and Fidelity Small

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

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

Diversification Opportunities for Fidelity Focused and Fidelity Small

0.9

Correlation Coefficient

Fidelity Focused  Fidelity Small

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Focused Stock and Fidelity Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Small Cap and Fidelity Focused 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 Focused Stock are associated (or correlated) with Fidelity Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Small Cap has no effect on the direction of Fidelity Focused i.e., Fidelity Focused and Fidelity Small go up and down completely randomly.

Pair Corralation between Fidelity Focused and Fidelity Small

Assuming the 90 days horizon Fidelity Focused Stock is expected to generate 1.52 times more return on investment than Fidelity Small. However, Fidelity Focused is 1.52 times more volatile than Fidelity Small Cap. It trades about -0.18 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about -0.34 per unit of risk. If you would invest  3,952  in Fidelity Focused Stock on December 2, 2024 and sell it today you would lose (207.00) from holding Fidelity Focused Stock or give up 5.24% of portfolio value over 90 days.

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

Fidelity Focused Stock  vs.  Fidelity Small Cap

Fidelity Focused Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Focused Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity Focused and Fidelity Small

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

The idea behind Fidelity Focused Stock and Fidelity 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.