Correlation Between Small-midcap Dividend and Fidelity Convertible

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

By analyzing existing cross correlation between Small Midcap Dividend Income and Fidelity Vertible Securities, you can compare the effects of market volatilities on Small-midcap Dividend and Fidelity Convertible 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 Small-midcap Dividend with a short position of Fidelity Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-midcap Dividend and Fidelity Convertible.

Diversification Opportunities for Small-midcap Dividend and Fidelity Convertible

0.96

Correlation Coefficient

Small-midcap Dividend  Fidelity Convertible

Almost no diversification

The 3 months correlation between Small-midcap and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income and Fidelity Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Convertible and Small-midcap Dividend 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 Small Midcap Dividend Income are associated (or correlated) with Fidelity Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Convertible has no effect on the direction of Small-midcap Dividend i.e., Small-midcap Dividend and Fidelity Convertible go up and down completely randomly.

Pair Corralation between Small-midcap Dividend and Fidelity Convertible

Assuming the 90 days horizon Small-midcap Dividend is expected to generate 1.2 times less return on investment than Fidelity Convertible. In addition to that, Small-midcap Dividend is 1.77 times more volatile than Fidelity Vertible Securities. It trades about 0.18 of its total potential returns per unit of risk. Fidelity Vertible Securities is currently generating about 0.38 per unit of volatility. If you would invest  3,318  in Fidelity Vertible Securities on August 31, 2024 and sell it today you would earn a total of  450.00  from holding Fidelity Vertible Securities or generate 13.56% return on investment over 90 days.

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

Small Midcap Dividend Income  vs.  Fidelity Vertible Securities

Small Midcap Dividend

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Midcap Dividend Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small-midcap Dividend may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Fidelity Convertible

Risk-Adjusted Performance

30 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Vertible Securities are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Convertible showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small-midcap Dividend and Fidelity Convertible

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

The idea behind Small Midcap Dividend Income and Fidelity Vertible Securities 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.