Correlation Between Fidelity Advisor and Oil Gas

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

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

Diversification Opportunities for Fidelity Advisor and Oil Gas

0.95

Correlation Coefficient

Fidelity Advisor  Oil Gas

Almost no diversification

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

Pair Corralation between Fidelity Advisor and Oil Gas

Assuming the 90 days horizon Fidelity Advisor Energy is expected to under-perform the Oil Gas. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Advisor Energy is 1.38 times less risky than Oil Gas. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Oil Gas Ultrasector is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,609  in Oil Gas Ultrasector on November 28, 2024 and sell it today you would lose (67.00) from holding Oil Gas Ultrasector or give up 1.86% of portfolio value over 90 days.

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

Fidelity Advisor Energy  vs.  Oil Gas Ultrasector

Fidelity Advisor Energy

Risk-Adjusted Performance

Very Weak

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

Oil Gas Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oil Gas Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Advisor and Oil Gas

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

The idea behind Fidelity Advisor Energy and Oil Gas Ultrasector 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.