Correlation Between VHAI and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both VHAI and Fidelity Advisor 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 VHAI and Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VHAI and Fidelity Advisor Semiconductors, you can compare the effects of market volatilities on VHAI and Fidelity Advisor 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 VHAI with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of VHAI and Fidelity Advisor.
Diversification Opportunities for VHAI and Fidelity Advisor
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between VHAI and Fidelity is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and Fidelity Advisor Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Sem and VHAI 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 VHAI are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Sem has no effect on the direction of VHAI i.e., VHAI and Fidelity Advisor go up and down completely randomly.
Pair Corralation between VHAI and Fidelity Advisor
Given the investment horizon of 90 days VHAI is expected to under-perform the Fidelity Advisor. In addition to that, VHAI is 5.8 times more volatile than Fidelity Advisor Semiconductors. It trades about -0.17 of its total potential returns per unit of risk. Fidelity Advisor Semiconductors is currently generating about 0.08 per unit of volatility. If you would invest 4,346 in Fidelity Advisor Semiconductors on September 4, 2024 and sell it today you would earn a total of 5,057 from holding Fidelity Advisor Semiconductors or generate 116.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 39.19% |
| Values | Daily Returns |
VHAI vs. Fidelity Advisor Semiconductor
Performance |
| Timeline |
| VHAI |
| Fidelity Advisor Sem |
VHAI and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VHAI and Fidelity Advisor
The main advantage of trading using opposite VHAI and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VHAI position performs unexpectedly, Fidelity Advisor 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 Advisor will offset losses from the drop in Fidelity Advisor's long position.The idea behind VHAI and Fidelity Advisor Semiconductors 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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