Correlation Between Fidelity Small and Champlain Small

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

Diversification Opportunities for Fidelity Small and Champlain Small

0.88

Correlation Coefficient

Fidelity Small  Champlain Small

Very poor diversification

The 3 months correlation between Fidelity and Champlain is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small 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 Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of Fidelity Small i.e., Fidelity Small and Champlain Small go up and down completely randomly.

Pair Corralation between Fidelity Small and Champlain Small

Assuming the 90 days horizon Fidelity Small Cap is expected to generate 1.26 times more return on investment than Champlain Small. However, Fidelity Small is 1.26 times more volatile than Champlain Small. It trades about 0.08 of its potential returns per unit of risk. Champlain Small is currently generating about 0.1 per unit of risk. If you would invest  3,126  in Fidelity Small Cap on July 6, 2024 and sell it today you would earn a total of  231.00  from holding Fidelity Small Cap or generate 7.39% return on investment over 90 days.

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

Fidelity Small Cap  vs.  Champlain Small

Fidelity Small Cap

Risk-Adjusted Performance

6 of 100

Modest

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 technical and fundamental indicators, Fidelity Small may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Champlain Small

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Fidelity Small and Champlain Small

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

The idea behind Fidelity Small Cap and Champlain Small 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.