Correlation Between Fidelity Advantage and IShares ESG

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

By analyzing existing cross correlation between Fidelity Advantage Bitcoin and iShares ESG Advanced, you can compare the effects of market volatilities on Fidelity Advantage and IShares ESG 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 Advantage with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advantage and IShares ESG.

Diversification Opportunities for Fidelity Advantage and IShares ESG

0.89

Correlation Coefficient

Fidelity Advantage  IShares ESG

Very poor diversification

The 3 months correlation between Fidelity and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advantage Bitcoin and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced and Fidelity Advantage 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 Advantage Bitcoin are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of Fidelity Advantage i.e., Fidelity Advantage and IShares ESG go up and down completely randomly.

Pair Corralation between Fidelity Advantage and IShares ESG

Assuming the 90 days trading horizon Fidelity Advantage Bitcoin is expected to generate 3.6 times more return on investment than IShares ESG. However, Fidelity Advantage is 3.6 times more volatile than iShares ESG Advanced. It trades about 0.14 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.14 per unit of risk. If you would invest  1,183  in Fidelity Advantage Bitcoin on September 12, 2024 and sell it today you would earn a total of  3,345  from holding Fidelity Advantage Bitcoin or generate 282.76% return on investment over 90 days.

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

Fidelity Advantage Bitcoin  vs.  iShares ESG Advanced

Fidelity Advantage

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advantage Bitcoin are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity Advantage displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares ESG Advanced

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Advanced are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Advantage and IShares ESG

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

The idea behind Fidelity Advantage Bitcoin and iShares ESG Advanced 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.