Correlation Between Holbrook Income and Fidelity Small

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

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

Diversification Opportunities for Holbrook Income and Fidelity Small

0.32

Correlation Coefficient

Holbrook Income  Fidelity Small

Weak diversification

The 3 months correlation between Holbrook and Fidelity is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Holbrook Income 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 Holbrook Income 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 Holbrook Income 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 Holbrook Income i.e., Holbrook Income and Fidelity Small go up and down completely randomly.

Pair Corralation between Holbrook Income and Fidelity Small

Assuming the 90 days horizon Holbrook Income is expected to generate 2.34 times less return on investment than Fidelity Small. But when comparing it to its historical volatility, Holbrook Income Fund is 4.35 times less risky than Fidelity Small. It trades about 0.12 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,044  in Fidelity Small Cap on October 25, 2024 and sell it today you would earn a total of  97.00  from holding Fidelity Small Cap or generate 4.75% return on investment over 90 days.

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

Holbrook Income Fund  vs.  Fidelity Small Cap

Holbrook Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holbrook Income Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Holbrook Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Small Cap

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Holbrook Income and Fidelity Small

The main advantage of trading using opposite Holbrook Income and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holbrook Income 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 Holbrook Income 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.