Correlation Between Fidelity Trend and Fidelity Small

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

Diversification Opportunities for Fidelity Trend and Fidelity Small

FidelityFidelityDiversified AwayFidelityFidelityDiversified Away100%
0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Trend Fund 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 Trend 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 Trend Fund 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 Trend i.e., Fidelity Trend and Fidelity Small go up and down completely randomly.

Pair Corralation between Fidelity Trend and Fidelity Small

Assuming the 90 days horizon Fidelity Trend Fund is expected to under-perform the Fidelity Small. In addition to that, Fidelity Trend is 1.57 times more volatile than Fidelity Small Cap. It trades about -0.02 of its total potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.02 per unit of volatility. If you would invest  3,351  in Fidelity Small Cap on September 24, 2024 and sell it today you would earn a total of  29.00  from holding Fidelity Small Cap or generate 0.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Fidelity Trend Fund  vs.  Fidelity Small Cap

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 051015
JavaScript chart by amCharts 3.21.15FTRNX FCPGX
       Timeline  
Fidelity Trend 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fidelity Trend Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Trend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec185190195200205210215220
Fidelity Small Cap 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec3333.53434.53535.53636.5

Fidelity Trend and Fidelity Small Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.01-2.26-1.5-0.74-0.01250.711.462.212.963.71 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15FTRNX FCPGX
       Returns  

Pair Trading with Fidelity Trend and Fidelity Small

The main advantage of trading using opposite Fidelity Trend and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Trend 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 Trend Fund 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.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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