Correlation Between Fidelity Advisor and Fidelity Municipal

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

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

Diversification Opportunities for Fidelity Advisor and Fidelity Municipal

0.85

Correlation Coefficient

Fidelity Advisor  Fidelity Municipal

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Growth and Fidelity Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Municipal Income and Fidelity Advisor 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 Advisor Growth are associated (or correlated) with Fidelity Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Municipal Income has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Fidelity Municipal go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Fidelity Municipal

Assuming the 90 days horizon Fidelity Advisor Growth is expected to generate 16.0 times more return on investment than Fidelity Municipal. However, Fidelity Advisor is 16.0 times more volatile than Fidelity Municipal Income. It trades about 0.12 of its potential returns per unit of risk. Fidelity Municipal Income is currently generating about 0.13 per unit of risk. If you would invest  7,195  in Fidelity Advisor Growth on September 28, 2024 and sell it today you would earn a total of  7,534  from holding Fidelity Advisor Growth or generate 104.71% return on investment over 90 days.

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

Fidelity Advisor Growth  vs.  Fidelity Municipal Income

Fidelity Advisor Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Municipal Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Municipal Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Advisor and Fidelity Municipal

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

The idea behind Fidelity Advisor Growth and Fidelity Municipal Income 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.