Correlation Between Small-cap Profund and Fidelity Small

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

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

Diversification Opportunities for Small-cap Profund and Fidelity Small

0.99

Correlation Coefficient

Small-cap Profund  Fidelity Small

No risk reduction

The 3 months correlation between Small-cap and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Profund Small Cap 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 Small-cap Profund 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 Cap Profund Small Cap 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 Small-cap Profund i.e., Small-cap Profund and Fidelity Small go up and down completely randomly.

Pair Corralation between Small-cap Profund and Fidelity Small

Assuming the 90 days horizon Small-cap Profund is expected to generate 1.03 times less return on investment than Fidelity Small. But when comparing it to its historical volatility, Small Cap Profund Small Cap is 1.02 times less risky than Fidelity Small. It trades about 0.03 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,228  in Fidelity Small Cap on October 4, 2024 and sell it today you would earn a total of  332.00  from holding Fidelity Small Cap or generate 14.9% return on investment over 90 days.

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

Small Cap Profund Small Cap  vs.  Fidelity Small Cap

Small Cap Profund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Profund Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small-cap Profund 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

0 of 100

Very Weak

Over the last 90 days Fidelity Small Cap has generated negative risk-adjusted returns adding no value to fund investors. 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 Small-cap Profund and Fidelity Small

The main advantage of trading using opposite Small-cap Profund and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Profund 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 Small Cap Profund Small Cap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.