Correlation Between Gmo Small and Fidelity Magellan

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

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

Diversification Opportunities for Gmo Small and Fidelity Magellan

0.76

Correlation Coefficient

Gmo Small  Fidelity Magellan

Poor diversification

The 3 months correlation between Gmo and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Fidelity Magellan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Magellan and Gmo 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 Gmo Small Cap are associated (or correlated) with Fidelity Magellan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Magellan has no effect on the direction of Gmo Small i.e., Gmo Small and Fidelity Magellan go up and down completely randomly.

Pair Corralation between Gmo Small and Fidelity Magellan

Assuming the 90 days horizon Gmo Small Cap is expected to under-perform the Fidelity Magellan. In addition to that, Gmo Small is 1.4 times more volatile than Fidelity Magellan Fund. It trades about -0.32 of its total potential returns per unit of risk. Fidelity Magellan Fund is currently generating about -0.17 per unit of volatility. If you would invest  1,560  in Fidelity Magellan Fund on September 23, 2024 and sell it today you would lose (62.00) from holding Fidelity Magellan Fund or give up 3.97% of portfolio value over 90 days.

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

Gmo Small Cap  vs.  Fidelity Magellan Fund

Gmo Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo 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.

Fidelity Magellan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Magellan Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fidelity Magellan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gmo Small and Fidelity Magellan

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

The idea behind Gmo Small Cap and Fidelity Magellan Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.