Correlation Between Fidelity Small and Virtus Kar

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

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

Diversification Opportunities for Fidelity Small and Virtus Kar

0.98

Correlation Coefficient

Fidelity Small  Virtus Kar

Almost no diversification

The 3 months correlation between Fidelity and Virtus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small and Fidelity Small 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 Small Cap are associated (or correlated) with Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Fidelity Small i.e., Fidelity Small and Virtus Kar go up and down completely randomly.

Pair Corralation between Fidelity Small and Virtus Kar

Assuming the 90 days horizon Fidelity Small is expected to generate 1.04 times less return on investment than Virtus Kar. But when comparing it to its historical volatility, Fidelity Small Cap is 1.07 times less risky than Virtus Kar. It trades about 0.2 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,607  in Virtus Kar Small Cap on September 3, 2024 and sell it today you would earn a total of  400.00  from holding Virtus Kar Small Cap or generate 15.34% return on investment over 90 days.

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

Fidelity Small Cap  vs.  Virtus Kar Small Cap

Fidelity Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Small showed solid returns over the last few months and may actually be approaching a breakup point.

Virtus Kar Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Virtus Kar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Small and Virtus Kar

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

The idea behind Fidelity Small Cap and Virtus Kar Small Cap 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.