Correlation Between FIDELITY SMALL and STEWARD SMALL-MID

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Can any of the company-specific risk be diversified away by investing in both FIDELITY SMALL and STEWARD SMALL-MID 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 STEWARD SMALL-MID 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 STEWARD SMALL MID CAP, you can compare the effects of market volatilities on FIDELITY SMALL and STEWARD SMALL-MID 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 STEWARD SMALL-MID. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIDELITY SMALL and STEWARD SMALL-MID.

Diversification Opportunities for FIDELITY SMALL and STEWARD SMALL-MID

 0.71 Correlation Coefficient

Poor diversification

The 3 months correlation between FIDELITY and STEWARD is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FIDELITY SMALL CAP and STEWARD SMALL-MID CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEWARD SMALL-MID CAP 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 STEWARD SMALL-MID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEWARD SMALL-MID CAP has no effect on the direction of FIDELITY SMALL i.e., FIDELITY SMALL and STEWARD SMALL-MID go up and down completely randomly.

Pair Corralation between FIDELITY SMALL and STEWARD SMALL-MID

Assuming the 90 days horizon FIDELITY SMALL CAP is expected to generate 1.05 times more return on investment than STEWARD SMALL-MID. However, FIDELITY SMALL is 1.05 times more volatile than STEWARD SMALL MID CAP. It trades about 0.28 of its potential returns per unit of risk. STEWARD SMALL MID CAP is currently generating about 0.22 per unit of risk. If you would invest  2,168  in FIDELITY SMALL CAP on March 10, 2023 and sell it today you would earn a total of  177.00  from holding FIDELITY SMALL CAP or generate 8.16% return on investment over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Significant Accuracy 100.0% Values Daily Returns

FIDELITY SMALL CAP  vs.  STEWARD SMALL-MID CAP

 Performance (%)
 Timeline
 FIDELITY SMALL CAP Correlation Profile

6 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in FIDELITY SMALL CAP are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, FIDELITY SMALL may actually be approaching a critical reversion point that can send shares even higher in July 2023.
 Performance Backtest Predict
 STEWARD SMALL-MID CAP Correlation Profile

4 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in STEWARD SMALL MID CAP are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, STEWARD SMALL-MID is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
 Performance Backtest Predict

FIDELITY SMALL and STEWARD SMALL-MID Volatility Contrast

 Predicted Return Density
 Returns

Pair Trading with FIDELITY SMALL and STEWARD SMALL-MID

The main advantage of trading using opposite FIDELITY SMALL and STEWARD SMALL-MID positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIDELITY SMALL position performs unexpectedly, STEWARD SMALL-MID 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 STEWARD SMALL-MID will offset losses from the drop in STEWARD SMALL-MID's long position.
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The idea behind FIDELITY SMALL CAP and STEWARD SMALL MID 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.
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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