Correlation Between Fidus Investment and WEC Energy

Can any of the company-specific risk be diversified away by investing in both Fidus Investment and WEC Energy 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 Fidus Investment and WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidus Investment Corp and WEC Energy Group, you can compare the effects of market volatilities on Fidus Investment and WEC Energy 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 Fidus Investment with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidus Investment and WEC Energy.

Diversification Opportunities for Fidus Investment and WEC Energy

0.51

Correlation Coefficient

Fidus Investment  WEC Energy

Very weak diversification

The 3 months correlation between Fidus and WEC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group and Fidus Investment 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 Fidus Investment Corp are associated (or correlated) with WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Fidus Investment i.e., Fidus Investment and WEC Energy go up and down completely randomly.

Pair Corralation between Fidus Investment and WEC Energy

Given the investment horizon of 90 days Fidus Investment Corp is expected to generate 0.71 times more return on investment than WEC Energy. However, Fidus Investment Corp is 1.4 times less risky than WEC Energy. It trades about 0.13 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.07 per unit of risk. If you would invest  1,549  in Fidus Investment Corp on September 21, 2024 and sell it today you would earn a total of  499.00  from holding Fidus Investment Corp or generate 32.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fidus Investment Corp  vs.  WEC Energy Group

Fidus Investment Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WEC Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEC Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidus Investment and WEC Energy

The main advantage of trading using opposite Fidus Investment and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidus Investment position performs unexpectedly, WEC Energy 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 WEC Energy will offset losses from the drop in WEC Energy's long position.

The idea behind Fidus Investment Corp and WEC Energy Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.