Correlation Between Fidelity Small and Invesco International

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

Diversification Opportunities for Fidelity Small and Invesco International

-0.68

Correlation Coefficient

Fidelity Small  Invesco International

Excellent diversification

The 3 months correlation between Fidelity and Invesco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Invesco International Diversif in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International 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 Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of Fidelity Small i.e., Fidelity Small and Invesco International go up and down completely randomly.

Pair Corralation between Fidelity Small and Invesco International

Assuming the 90 days horizon Fidelity Small Cap is expected to generate 1.23 times more return on investment than Invesco International. However, Fidelity Small is 1.23 times more volatile than Invesco International Diversified. It trades about -0.02 of its potential returns per unit of risk. Invesco International Diversified is currently generating about -0.06 per unit of risk. If you would invest  2,709  in Fidelity Small Cap on September 20, 2024 and sell it today you would lose (12.00) from holding Fidelity Small Cap or give up 0.44% of portfolio value over 90 days.

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

Fidelity Small Cap  vs.  Invesco International Diversif

Fidelity Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Small and Invesco International

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

The idea behind Fidelity Small Cap and Invesco International Diversified 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.