Correlation Between Fidelity Small and First Trust

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

By analyzing existing cross correlation between Fidelity Small Mid Cap and First Trust SMID, you can compare the effects of market volatilities on Fidelity Small and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Small and First Trust.

Diversification Opportunities for Fidelity Small and First Trust

0.85

Correlation Coefficient

Fidelity Small  First Trust

Very poor diversification

The 3 months correlation between Fidelity and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Mid Cap and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID 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 Mid Cap are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SMID has no effect on the direction of Fidelity Small i.e., Fidelity Small and First Trust go up and down completely randomly.

Pair Corralation between Fidelity Small and First Trust

Given the investment horizon of 90 days Fidelity Small Mid Cap is expected to generate 1.02 times more return on investment than First Trust. However, Fidelity Small is 1.02 times more volatile than First Trust SMID. It trades about 0.1 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.04 per unit of risk. If you would invest  2,685  in Fidelity Small Mid Cap on May 16, 2025 and sell it today you would earn a total of  154.00  from holding Fidelity Small Mid Cap or generate 5.74% return on investment over 90 days.

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

Fidelity Small Mid Cap  vs.  First Trust SMID

Fidelity Small Mid

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Mid Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Small is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

First Trust SMID

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SMID are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity Small and First Trust

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

The idea behind Fidelity Small Mid Cap and First Trust SMID 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.