Correlation Between Fidelity Convertible and Teton Convertible
Can any of the company-specific risk be diversified away by investing in both Fidelity Convertible and Teton Convertible 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 Convertible and Teton Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Vertible Securities and Teton Vertible Securities, you can compare the effects of market volatilities on Fidelity Convertible and Teton Convertible 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 Convertible with a short position of Teton Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Convertible and Teton Convertible.
Diversification Opportunities for Fidelity Convertible and Teton Convertible
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Teton is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Vertible Securities and Teton Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Vertible Securities and Fidelity Convertible 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 Vertible Securities are associated (or correlated) with Teton Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Vertible Securities has no effect on the direction of Fidelity Convertible i.e., Fidelity Convertible and Teton Convertible go up and down completely randomly.
Pair Corralation between Fidelity Convertible and Teton Convertible
Assuming the 90 days horizon Fidelity Convertible is expected to generate 1.25 times less return on investment than Teton Convertible. In addition to that, Fidelity Convertible is 1.06 times more volatile than Teton Vertible Securities. It trades about 0.39 of its total potential returns per unit of risk. Teton Vertible Securities is currently generating about 0.51 per unit of volatility. If you would invest 1,384 in Teton Vertible Securities on August 24, 2024 and sell it today you would earn a total of 102.00 from holding Teton Vertible Securities or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Vertible Securities vs. Teton Vertible Securities
Performance |
| Timeline |
| Fidelity Convertible |
| Teton Vertible Securities |
Fidelity Convertible and Teton Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Convertible and Teton Convertible
The main advantage of trading using opposite Fidelity Convertible and Teton Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Convertible position performs unexpectedly, Teton Convertible 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 Teton Convertible will offset losses from the drop in Teton Convertible's long position.The idea behind Fidelity Vertible Securities and Teton Vertible Securities 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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