Correlation Between Mid Cap and Fidelity Low-priced

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Can any of the company-specific risk be diversified away by investing in both Mid Cap and Fidelity Low-priced 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 Mid Cap and Fidelity Low-priced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and Fidelity Low Priced Stock, you can compare the effects of market volatilities on Mid Cap and Fidelity Low-priced 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 Mid Cap with a short position of Fidelity Low-priced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Fidelity Low-priced.

Diversification Opportunities for Mid Cap and Fidelity Low-priced

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Mid and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Fidelity Low Priced Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Priced and Mid Cap 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 Mid Cap Value are associated (or correlated) with Fidelity Low-priced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Priced has no effect on the direction of Mid Cap i.e., Mid Cap and Fidelity Low-priced go up and down completely randomly.

Pair Corralation between Mid Cap and Fidelity Low-priced

Assuming the 90 days horizon Mid Cap Value is expected to under-perform the Fidelity Low-priced. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mid Cap Value is 1.02 times less risky than Fidelity Low-priced. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Fidelity Low Priced Stock is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,721  in Fidelity Low Priced Stock on February 6, 2024 and sell it today you would lose (47.00) from holding Fidelity Low Priced Stock or give up 1.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Mid Cap Value  vs.  Fidelity Low Priced Stock

 Performance 
       Timeline  
Mid Cap Value 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Fidelity Low Priced 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Priced Stock are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Fidelity Low-priced may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Mid Cap and Fidelity Low-priced Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mid Cap and Fidelity Low-priced

The main advantage of trading using opposite Mid Cap and Fidelity Low-priced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Fidelity Low-priced 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 Low-priced will offset losses from the drop in Fidelity Low-priced's long position.
The idea behind Mid Cap Value and Fidelity Low Priced Stock 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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