Correlation Between Versus Capital and Fidelity Advisor

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

By analyzing existing cross correlation between Versus Capital Multi Manager and Fidelity Advisor Real, you can compare the effects of market volatilities on Versus Capital 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 Versus Capital with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versus Capital and Fidelity Advisor.

Diversification Opportunities for Versus Capital and Fidelity Advisor

0.71

Correlation Coefficient

Versus Capital  Fidelity Advisor

Poor diversification

The 3 months correlation between Versus and Fidelity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Versus Capital Multi Manager and Fidelity Advisor Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Real and Versus Capital 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 Versus Capital Multi Manager 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 Real has no effect on the direction of Versus Capital i.e., Versus Capital and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Versus Capital and Fidelity Advisor

Assuming the 90 days horizon Versus Capital is expected to generate 7.9 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Versus Capital Multi Manager is 5.39 times less risky than Fidelity Advisor. It trades about 0.03 of its potential returns per unit of risk. Fidelity Advisor Real is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,619  in Fidelity Advisor Real on December 30, 2024 and sell it today you would earn a total of  44.00  from holding Fidelity Advisor Real or generate 2.72% return on investment over 90 days.

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

Versus Capital Multi Manager  vs.  Fidelity Advisor Real

Versus Capital Multi

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Versus Capital Multi Manager are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Versus Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Advisor Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Real are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Versus Capital and Fidelity Advisor

The main advantage of trading using opposite Versus Capital and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Versus Capital 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 Versus Capital Multi Manager and Fidelity Advisor Real 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.