Correlation Between VictoryShares USAA and Fidelity Corporate

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

By analyzing existing cross correlation between VictoryShares USAA Core and Fidelity Corporate Bond, you can compare the effects of market volatilities on VictoryShares USAA and Fidelity Corporate 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 VictoryShares USAA with a short position of Fidelity Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares USAA and Fidelity Corporate.

Diversification Opportunities for VictoryShares USAA and Fidelity Corporate

0.99

Correlation Coefficient

VictoryShares USAA  Fidelity Corporate

No risk reduction

The 3 months correlation between VictoryShares and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares USAA Core and Fidelity Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Corporate Bond and VictoryShares USAA 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 VictoryShares USAA Core are associated (or correlated) with Fidelity Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Corporate Bond has no effect on the direction of VictoryShares USAA i.e., VictoryShares USAA and Fidelity Corporate go up and down completely randomly.

Pair Corralation between VictoryShares USAA and Fidelity Corporate

Given the investment horizon of 90 days VictoryShares USAA is expected to generate 1.21 times less return on investment than Fidelity Corporate. But when comparing it to its historical volatility, VictoryShares USAA Core is 1.13 times less risky than Fidelity Corporate. It trades about 0.27 of its potential returns per unit of risk. Fidelity Corporate Bond is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  4,513  in Fidelity Corporate Bond on February 26, 2024 and sell it today you would earn a total of  90.00  from holding Fidelity Corporate Bond or generate 1.99% return on investment over 90 days.

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

VictoryShares USAA Core  vs.  Fidelity Corporate Bond

VictoryShares USAA Core

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares USAA Core are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, VictoryShares USAA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Corporate Bond

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Corporate Bond are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Fidelity Corporate is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with VictoryShares USAA and Fidelity Corporate

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

The idea behind VictoryShares USAA Core and Fidelity Corporate Bond 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.