Correlation Between Snap and Fidelity Equity
Can any of the company-specific risk be diversified away by investing in both Snap and Fidelity Equity 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 Snap and Fidelity Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Fidelity Equity Premium, you can compare the effects of market volatilities on Snap and Fidelity Equity 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 Snap with a short position of Fidelity Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Fidelity Equity.
Diversification Opportunities for Snap and Fidelity Equity
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Snap and Fidelity is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Fidelity Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Premium and Snap 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 Snap Inc are associated (or correlated) with Fidelity Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Premium has no effect on the direction of Snap i.e., Snap and Fidelity Equity go up and down completely randomly.
Pair Corralation between Snap and Fidelity Equity
Given the investment horizon of 90 days Snap Inc is expected to under-perform the Fidelity Equity. But the stock apears to be less risky and, when comparing its historical volatility, Snap Inc is 1.44 times less risky than Fidelity Equity. The stock trades about -0.03 of its potential returns per unit of risk. The Fidelity Equity Premium is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,861 in Fidelity Equity Premium on August 29, 2024 and sell it today you would earn a total of 866.00 from holding Fidelity Equity Premium or generate 46.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 33.33% |
| Values | Daily Returns |
Snap Inc vs. Fidelity Equity Premium
Performance |
| Timeline |
| Snap Inc |
| Fidelity Equity Premium |
Snap and Fidelity Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Fidelity Equity
The main advantage of trading using opposite Snap and Fidelity Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Fidelity Equity 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 Equity will offset losses from the drop in Fidelity Equity's long position.The idea behind Snap Inc and Fidelity Equity Premium 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.| Fidelity Equity vs. Fidelity Global Value | Fidelity Equity vs. Fidelity Momentum ETF | Fidelity Equity vs. Fidelity Canadian High | Fidelity Equity vs. Fidelity All in One Balanced |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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