Correlation Between Fidelity Advisor and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both Fidelity Advisor and Hennessy 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 Advisor and Hennessy Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Advisor Semiconductors and Hennessy Small Cap, you can compare the effects of market volatilities on Fidelity Advisor and Hennessy 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 Advisor with a short position of Hennessy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Hennessy Small.
Diversification Opportunities for Fidelity Advisor and Hennessy Small
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fidelity and Hennessy is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Semiconductor and Hennessy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Small Cap and Fidelity Advisor 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 Advisor Semiconductors are associated (or correlated) with Hennessy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Small Cap has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Hennessy Small go up and down completely randomly.
Pair Corralation between Fidelity Advisor and Hennessy Small
Assuming the 90 days horizon Fidelity Advisor is expected to generate 3.29 times less return on investment than Hennessy Small. But when comparing it to its historical volatility, Fidelity Advisor Semiconductors is 1.01 times less risky than Hennessy Small. It trades about 0.03 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,758 in Hennessy Small Cap on August 29, 2024 and sell it today you would earn a total of 425.00 from holding Hennessy Small Cap or generate 15.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Advisor Semiconductor vs. Hennessy Small Cap
Performance |
| Timeline |
| Fidelity Advisor Sem |
| Hennessy Small Cap |
Fidelity Advisor and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Advisor and Hennessy Small
The main advantage of trading using opposite Fidelity Advisor and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Advisor position performs unexpectedly, Hennessy 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 Hennessy Small will offset losses from the drop in Hennessy Small's long position.The idea behind Fidelity Advisor Semiconductors and Hennessy Small 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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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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