Correlation Between Fidelity Trend and Virtus Convertible

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

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

Diversification Opportunities for Fidelity Trend and Virtus Convertible

0.97

Correlation Coefficient

Fidelity Trend  Virtus Convertible

Almost no diversification

The 3 months correlation between Fidelity and Virtus is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Trend Fund and Virtus Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Convertible and Fidelity Trend 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 Trend Fund are associated (or correlated) with Virtus Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Convertible has no effect on the direction of Fidelity Trend i.e., Fidelity Trend and Virtus Convertible go up and down completely randomly.

Pair Corralation between Fidelity Trend and Virtus Convertible

Assuming the 90 days horizon Fidelity Trend Fund is expected to generate 2.06 times more return on investment than Virtus Convertible. However, Fidelity Trend is 2.06 times more volatile than Virtus Convertible. It trades about 0.23 of its potential returns per unit of risk. Virtus Convertible is currently generating about 0.28 per unit of risk. If you would invest  18,455  in Fidelity Trend Fund on September 16, 2024 and sell it today you would earn a total of  3,356  from holding Fidelity Trend Fund or generate 18.18% return on investment over 90 days.

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

Fidelity Trend Fund  vs.  Virtus Convertible

Fidelity Trend

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Trend Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Trend showed solid returns over the last few months and may actually be approaching a breakup point.

Virtus Convertible

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Convertible are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Virtus Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Trend and Virtus Convertible

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

The idea behind Fidelity Trend Fund and Virtus Convertible 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.