Correlation Between Lsv Small and Fidelity Stock

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

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

Diversification Opportunities for Lsv Small and Fidelity Stock

0.83

Correlation Coefficient

Lsv Small  Fidelity Stock

Very poor diversification

The 3 months correlation between Lsv and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector and Lsv 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 Lsv Small Cap are associated (or correlated) with Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Lsv Small i.e., Lsv Small and Fidelity Stock go up and down completely randomly.

Pair Corralation between Lsv Small and Fidelity Stock

Assuming the 90 days horizon Lsv Small Cap is expected to under-perform the Fidelity Stock. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lsv Small Cap is 1.2 times less risky than Fidelity Stock. The mutual fund trades about -0.4 of its potential returns per unit of risk. The Fidelity Stock Selector is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  8,755  in Fidelity Stock Selector on October 16, 2024 and sell it today you would lose (761.00) from holding Fidelity Stock Selector or give up 8.69% of portfolio value over 90 days.

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

Lsv Small Cap  vs.  Fidelity Stock Selector

Lsv Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lsv 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 Stock Selector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lsv Small and Fidelity Stock

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

The idea behind Lsv Small Cap and Fidelity Stock Selector 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.