Correlation Between VMware and Fidelity Growth

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

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

Diversification Opportunities for VMware and Fidelity Growth

-0.34

Correlation Coefficient

VMware  Fidelity Growth

Very good diversification

The 3 months correlation between VMware and Fidelity is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Fidelity Growth Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Growth Discovery and VMware 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 VMware Inc are associated (or correlated) with Fidelity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Growth Discovery has no effect on the direction of VMware i.e., VMware and Fidelity Growth go up and down completely randomly.

Pair Corralation between VMware and Fidelity Growth

Considering the 90-day investment horizon VMware is expected to generate 1.21 times less return on investment than Fidelity Growth. In addition to that, VMware is 1.34 times more volatile than Fidelity Growth Discovery. It trades about 0.05 of its total potential returns per unit of risk. Fidelity Growth Discovery is currently generating about 0.08 per unit of volatility. If you would invest  4,096  in Fidelity Growth Discovery on January 25, 2024 and sell it today you would earn a total of  1,926  from holding Fidelity Growth Discovery or generate 47.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.14%
Values	Daily Returns

VMware Inc  vs.  Fidelity Growth Discovery

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fidelity Growth Discovery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Growth Discovery are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VMware and Fidelity Growth

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

The idea behind VMware Inc and Fidelity Growth Discovery 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.