Correlation Between Fidelity Advisor and Fidelity Contrafund

Can any of the company-specific risk be diversified away by investing in both Fidelity Advisor and Fidelity Contrafund 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 Contrafund 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 Contrafund, you can compare the effects of market volatilities on Fidelity Advisor and Fidelity Contrafund 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 Contrafund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Fidelity Contrafund.

Diversification Opportunities for Fidelity Advisor and Fidelity Contrafund

0.95

Correlation Coefficient

Fidelity Advisor  Fidelity Contrafund

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Growth and Fidelity Contrafund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund 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 Contrafund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Contrafund has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Fidelity Contrafund go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Fidelity Contrafund

Assuming the 90 days horizon Fidelity Advisor Growth is expected to generate 1.09 times more return on investment than Fidelity Contrafund. However, Fidelity Advisor is 1.09 times more volatile than Fidelity Contrafund. It trades about 0.22 of its potential returns per unit of risk. Fidelity Contrafund is currently generating about 0.11 per unit of risk. If you would invest  17,652  in Fidelity Advisor Growth on September 12, 2024 and sell it today you would earn a total of  2,565  from holding Fidelity Advisor Growth or generate 14.53% return on investment over 90 days.

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

Fidelity Advisor Growth  vs.  Fidelity Contrafund

Fidelity Advisor Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Contrafund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Contrafund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Contrafund 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 Contrafund

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

The idea behind Fidelity Advisor Growth and Fidelity Contrafund 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.