Correlation Between Fidelity Servative and Virtus Dfa

Can any of the company-specific risk be diversified away by investing in both Fidelity Servative and Virtus Dfa 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 Servative and Virtus Dfa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Servative Income and Virtus Dfa 2040, you can compare the effects of market volatilities on Fidelity Servative and Virtus Dfa 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 Servative with a short position of Virtus Dfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Servative and Virtus Dfa.

Diversification Opportunities for Fidelity Servative and Virtus Dfa

0.72

Correlation Coefficient

Fidelity Servative  Virtus Dfa

Poor diversification

The 3 months correlation between Fidelity and Virtus is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Servative Income and Virtus Dfa 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Dfa 2040 and Fidelity Servative 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 Servative Income are associated (or correlated) with Virtus Dfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Dfa 2040 has no effect on the direction of Fidelity Servative i.e., Fidelity Servative and Virtus Dfa go up and down completely randomly.

Pair Corralation between Fidelity Servative and Virtus Dfa

Assuming the 90 days horizon Fidelity Servative is expected to generate 9.22 times less return on investment than Virtus Dfa. But when comparing it to its historical volatility, Fidelity Servative Income is 8.07 times less risky than Virtus Dfa. It trades about 0.13 of its potential returns per unit of risk. Virtus Dfa 2040 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Virtus Dfa 2040 on September 12, 2024 and sell it today you would earn a total of  54.00  from holding Virtus Dfa 2040 or generate 4.61% return on investment over 90 days.

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

Fidelity Servative Income  vs.  Virtus Dfa 2040

Fidelity Servative Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Servative Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Servative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Dfa 2040

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Dfa 2040 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Dfa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Servative and Virtus Dfa

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

The idea behind Fidelity Servative Income and Virtus Dfa 2040 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 Anywhere module to track or share privately all of your investments from the convenience of any device.