Correlation Between Fidelity Advantage and Fidelity Momentum

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

By analyzing existing cross correlation between Fidelity Advantage Ether and Fidelity Momentum ETF, you can compare the effects of market volatilities on Fidelity Advantage and Fidelity Momentum 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 Fidelity Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advantage and Fidelity Momentum.

Diversification Opportunities for Fidelity Advantage and Fidelity Momentum

-0.19

Correlation Coefficient

Fidelity Advantage  Fidelity Momentum

Good diversification

The 3 months correlation between Fidelity and Fidelity is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advantage Ether and Fidelity Momentum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum ETF 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 Ether are associated (or correlated) with Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum ETF has no effect on the direction of Fidelity Advantage i.e., Fidelity Advantage and Fidelity Momentum go up and down completely randomly.

Pair Corralation between Fidelity Advantage and Fidelity Momentum

Assuming the 90 days trading horizon Fidelity Advantage Ether is expected to under-perform the Fidelity Momentum. In addition to that, Fidelity Advantage is 4.28 times more volatile than Fidelity Momentum ETF. It trades about -0.17 of its total potential returns per unit of risk. Fidelity Momentum ETF is currently generating about -0.06 per unit of volatility. If you would invest  1,753  in Fidelity Momentum ETF on December 5, 2024 and sell it today you would lose (70.00) from holding Fidelity Momentum ETF or give up 3.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Fidelity Advantage Ether  vs.  Fidelity Momentum ETF

Fidelity Advantage Ether

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advantage Ether has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Fidelity Momentum ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Momentum ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Fidelity Momentum is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidelity Advantage and Fidelity Momentum

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

The idea behind Fidelity Advantage Ether and Fidelity Momentum ETF 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.