Correlation Between Dimensional Small and Fidelity MSCI

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

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

Diversification Opportunities for Dimensional Small and Fidelity MSCI

0.98

Correlation Coefficient

Dimensional Small  Fidelity MSCI

Almost no diversification

The 3 months correlation between Dimensional and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Fidelity MSCI Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Financials and Dimensional 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 Dimensional Small Cap are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Financials has no effect on the direction of Dimensional Small i.e., Dimensional Small and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Dimensional Small and Fidelity MSCI

Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.14 times more return on investment than Fidelity MSCI. However, Dimensional Small is 1.14 times more volatile than Fidelity MSCI Financials. It trades about 0.06 of its potential returns per unit of risk. Fidelity MSCI Financials is currently generating about 0.05 per unit of risk. If you would invest  6,221  in Dimensional Small Cap on May 10, 2025 and sell it today you would earn a total of  209.00  from holding Dimensional Small Cap or generate 3.36% return on investment over 90 days.

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

Dimensional Small Cap  vs.  Fidelity MSCI Financials

Dimensional Small Cap

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Small Cap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dimensional Small is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity MSCI Financials

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dimensional Small and Fidelity MSCI

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

The idea behind Dimensional Small Cap and Fidelity MSCI Financials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.