Correlation Between Timken and Fidus Investment
Can any of the company-specific risk be diversified away by investing in both Timken and Fidus Investment 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 Timken and Fidus Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Fidus Investment Corp, you can compare the effects of market volatilities on Timken and Fidus Investment 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 Timken with a short position of Fidus Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Fidus Investment.
Diversification Opportunities for Timken and Fidus Investment
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Timken and Fidus is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp and Timken 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 Timken Company are associated (or correlated) with Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of Timken i.e., Timken and Fidus Investment go up and down completely randomly.
Pair Corralation between Timken and Fidus Investment
Considering the 90-day investment horizon Timken Company is expected to under-perform the Fidus Investment. In addition to that, Timken is 5.2 times more volatile than Fidus Investment Corp. It trades about -0.07 of its total potential returns per unit of risk. Fidus Investment Corp is currently generating about 0.71 per unit of volatility. If you would invest 1,920 in Fidus Investment Corp on September 3, 2024 and sell it today you would earn a total of 209.00 from holding Fidus Investment Corp or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timken Company vs. Fidus Investment Corp
Performance |
| Timeline |
| Timken Company |
| Fidus Investment Corp |
Timken and Fidus Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Fidus Investment
The main advantage of trading using opposite Timken and Fidus Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Fidus Investment 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 Fidus Investment will offset losses from the drop in Fidus Investment's long position.The idea behind Timken Company and Fidus Investment Corp 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.| Fidus Investment vs. Federated Premier Municipal | Fidus Investment vs. Blackrock Muniyield | Fidus Investment vs. Federated Investors B | Fidus Investment vs. SEI Investments |
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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