Correlation Between Strategic Allocation and Fidelity Advisor

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

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

Diversification Opportunities for Strategic Allocation and Fidelity Advisor

0.73

Correlation Coefficient

Strategic Allocation  Fidelity Advisor

Poor diversification

The 3 months correlation between Strategic and Fidelity is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Fidelity Advisor Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Health and Strategic Allocation 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 Strategic Allocation Moderate 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 Health has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Strategic Allocation and Fidelity Advisor

Assuming the 90 days horizon Strategic Allocation Moderate is expected to generate 0.29 times more return on investment than Fidelity Advisor. However, Strategic Allocation Moderate is 3.44 times less risky than Fidelity Advisor. It trades about -0.38 of its potential returns per unit of risk. Fidelity Advisor Health is currently generating about -0.27 per unit of risk. If you would invest  686.00  in Strategic Allocation Moderate on October 9, 2024 and sell it today you would lose (49.00) from holding Strategic Allocation Moderate or give up 7.14% of portfolio value over 90 days.

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

Strategic Allocation Moderate  vs.  Fidelity Advisor Health

Strategic Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Allocation Moderate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Strategic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Advisor Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Strategic Allocation and Fidelity Advisor

The main advantage of trading using opposite Strategic Allocation and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation 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 Strategic Allocation Moderate and Fidelity Advisor Health 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.