Correlation Between Fidelity Advisor and Health Care

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

By analyzing existing cross correlation between Fidelity Advisor Financial and Health Care Portfolio, you can compare the effects of market volatilities on Fidelity Advisor and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Health Care.

Diversification Opportunities for Fidelity Advisor and Health Care

0.88

Correlation Coefficient

Fidelity Advisor  Health Care

Very poor diversification

The 3 months correlation between Fidelity and Health is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Financial and Health Care Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Portfolio 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 Financial are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Portfolio has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Health Care go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Health Care

Assuming the 90 days horizon Fidelity Advisor Financial is expected to under-perform the Health Care. In addition to that, Fidelity Advisor is 1.19 times more volatile than Health Care Portfolio. It trades about -0.01 of its total potential returns per unit of risk. Health Care Portfolio is currently generating about -0.01 per unit of volatility. If you would invest  2,727  in Health Care Portfolio on December 30, 2024 and sell it today you would lose (18.00) from holding Health Care Portfolio or give up 0.66% of portfolio value over 90 days.

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

Fidelity Advisor Financial  vs.  Health Care Portfolio

Fidelity Advisor Fin

Risk-Adjusted Performance

Very Weak

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

Health Care Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Health Care Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Health Care 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 Health Care

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

The idea behind Fidelity Advisor Financial and Health Care Portfolio 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.