Correlation Between Smead Value and Fidelity Series

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

By analyzing existing cross correlation between Smead Value Fund and Fidelity Series 1000, you can compare the effects of market volatilities on Smead Value and Fidelity Series 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 Smead Value with a short position of Fidelity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Fidelity Series.

Diversification Opportunities for Smead Value and Fidelity Series

0.95

Correlation Coefficient

Smead Value  Fidelity Series

Almost no diversification

The 3 months correlation between Smead and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Fidelity Series 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series 1000 and Smead Value 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 Smead Value Fund are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series 1000 has no effect on the direction of Smead Value i.e., Smead Value and Fidelity Series go up and down completely randomly.

Pair Corralation between Smead Value and Fidelity Series

Assuming the 90 days horizon Smead Value Fund is expected to generate 1.24 times more return on investment than Fidelity Series. However, Smead Value is 1.24 times more volatile than Fidelity Series 1000. It trades about 0.07 of its potential returns per unit of risk. Fidelity Series 1000 is currently generating about 0.08 per unit of risk. If you would invest  6,239  in Smead Value Fund on February 10, 2024 and sell it today you would earn a total of  2,010  from holding Smead Value Fund or generate 32.22% return on investment over 90 days.

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

Smead Value Fund  vs.  Fidelity Series 1000

Smead Value Fund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smead Value Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady essential indicators, Smead Value may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Fidelity Series 1000

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series 1000 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Series is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smead Value and Fidelity Series

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

The idea behind Smead Value Fund and Fidelity Series 1000 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.