Correlation Between Fidelity Investment and Fidelity Advisor

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

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

Diversification Opportunities for Fidelity Investment and Fidelity Advisor

0.91

Correlation Coefficient

Fidelity Investment  Fidelity Advisor

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Investment Grade and Fidelity Advisor Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor and Fidelity Investment 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 Investment Grade 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 has no effect on the direction of Fidelity Investment i.e., Fidelity Investment and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Fidelity Investment and Fidelity Advisor

Assuming the 90 days horizon Fidelity Investment Grade is expected to under-perform the Fidelity Advisor. In addition to that, Fidelity Investment is 2.55 times more volatile than Fidelity Advisor Limited. It trades about -0.08 of its total potential returns per unit of risk. Fidelity Advisor Limited is currently generating about -0.01 per unit of volatility. If you would invest  1,142  in Fidelity Advisor Limited on September 12, 2024 and sell it today you would lose (1.00) from holding Fidelity Advisor Limited or give up 0.09% of portfolio value over 90 days.

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

Fidelity Investment Grade  vs.  Fidelity Advisor Limited

Fidelity Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Advisor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Limited has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Advisor 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 Investment and Fidelity Advisor

The main advantage of trading using opposite Fidelity Investment and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Investment 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 Fidelity Investment Grade and Fidelity Advisor Limited 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.