Correlation Between Fidelity Small and Sparta Capital

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

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

Diversification Opportunities for Fidelity Small and Sparta Capital

-0.05

Correlation Coefficient

Fidelity Small  Sparta Capital

Good diversification

The 3 months correlation between Fidelity and Sparta is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Fidelity 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 Fidelity Small Cap are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Fidelity Small i.e., Fidelity Small and Sparta Capital go up and down completely randomly.

Pair Corralation between Fidelity Small and Sparta Capital

Assuming the 90 days horizon Fidelity Small Cap is expected to under-perform the Sparta Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Small Cap is 27.17 times less risky than Sparta Capital. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Sparta Capital is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1.21  in Sparta Capital on February 4, 2024 and sell it today you would earn a total of  1.79  from holding Sparta Capital or generate 147.93% return on investment over 90 days.

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

Fidelity Small Cap  vs.  Sparta Capital

Fidelity Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Small may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Sparta Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sparta Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Small and Sparta Capital

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

The idea behind Fidelity Small Cap and Sparta Capital 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.