Correlation Between Fidelity International and Virtus International
Can any of the company-specific risk be diversified away by investing in both Fidelity International and Virtus 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 International and Virtus International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity International Small and Virtus International Small Cap, you can compare the effects of market volatilities on Fidelity International and Virtus 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 International with a short position of Virtus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity International and Virtus International.
Diversification Opportunities for Fidelity International and Virtus International
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Virtus is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International Small and Virtus International Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus International and Fidelity International 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 International Small are associated (or correlated) with Virtus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus International has no effect on the direction of Fidelity International i.e., Fidelity International and Virtus International go up and down completely randomly.
Pair Corralation between Fidelity International and Virtus International
Assuming the 90 days horizon Fidelity International is expected to generate 1.26 times less return on investment than Virtus International. But when comparing it to its historical volatility, Fidelity International Small is 1.37 times less risky than Virtus International. It trades about 0.13 of its potential returns per unit of risk. Virtus International Small Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,852 in Virtus International Small Cap on December 1, 2024 and sell it today you would earn a total of 75.00 from holding Virtus International Small Cap or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity International Small vs. Virtus International Small Cap
Performance |
| Timeline |
| Fidelity International |
| Virtus International |
Fidelity International and Virtus International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity International and Virtus International
The main advantage of trading using opposite Fidelity International and Virtus International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity International position performs unexpectedly, Virtus 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 Virtus International will offset losses from the drop in Virtus International's long position.The idea behind Fidelity International Small and Virtus International 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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