Correlation Between Fidelity Flex and Fidelity Advisor

Can any of the company-specific risk be diversified away by investing in both Fidelity Flex 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 Flex 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 Flex 500 and Fidelity Advisor Small, you can compare the effects of market volatilities on Fidelity Flex 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 Flex with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Flex and Fidelity Advisor.

Diversification Opportunities for Fidelity Flex and Fidelity Advisor

0.2

Correlation Coefficient

Fidelity Flex  Fidelity Advisor

Modest diversification

The 3 months correlation between Fidelity and Fidelity is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Flex 500 and Fidelity Advisor Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Small and Fidelity Flex 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 Flex 500 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 Small has no effect on the direction of Fidelity Flex i.e., Fidelity Flex and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Fidelity Flex and Fidelity Advisor

Assuming the 90 days horizon Fidelity Flex 500 is expected to generate 0.52 times more return on investment than Fidelity Advisor. However, Fidelity Flex 500 is 1.94 times less risky than Fidelity Advisor. It trades about -0.02 of its potential returns per unit of risk. Fidelity Advisor Small is currently generating about -0.22 per unit of risk. If you would invest  2,577  in Fidelity Flex 500 on December 2, 2024 and sell it today you would lose (32.00) from holding Fidelity Flex 500 or give up 1.24% of portfolio value over 90 days.

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

Fidelity Flex 500  vs.  Fidelity Advisor Small

Fidelity Flex 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Flex 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fidelity Flex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Advisor Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advisor Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity Flex and Fidelity Advisor

The main advantage of trading using opposite Fidelity Flex and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Flex 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 Flex 500 and Fidelity Advisor Small 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.