Correlation Between Smallcap Value and Fidelity Large

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

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

Diversification Opportunities for Smallcap Value and Fidelity Large

0.84

Correlation Coefficient

Smallcap Value  Fidelity Large

Very poor diversification

The 3 months correlation between Smallcap and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Value Fund and Fidelity Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Large Cap and Smallcap Value 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 Smallcap Value Fund are associated (or correlated) with Fidelity Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Large Cap has no effect on the direction of Smallcap Value i.e., Smallcap Value and Fidelity Large go up and down completely randomly.

Pair Corralation between Smallcap Value and Fidelity Large

Assuming the 90 days horizon Smallcap Value Fund is expected to generate 2.11 times more return on investment than Fidelity Large. However, Smallcap Value is 2.11 times more volatile than Fidelity Large Cap. It trades about 0.12 of its potential returns per unit of risk. Fidelity Large Cap is currently generating about 0.2 per unit of risk. If you would invest  1,054  in Smallcap Value Fund on June 30, 2025 and sell it today you would earn a total of  94.00  from holding Smallcap Value Fund or generate 8.92% return on investment over 90 days.

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

Smallcap Value Fund  vs.  Fidelity Large Cap

Smallcap Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Value Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking indicators, Smallcap Value may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Fidelity Large Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Fidelity Large may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Pair Trading with Smallcap Value and Fidelity Large

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

The idea behind Smallcap Value Fund and Fidelity Large 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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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.