Correlation Between Fidelity Advantage and Simplify Equity

Can any of the company-specific risk be diversified away by investing in both Fidelity Advantage and Simplify Equity 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 Simplify Equity 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 Simplify Equity PLUS, you can compare the effects of market volatilities on Fidelity Advantage and Simplify Equity 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 Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advantage and Simplify Equity.

Diversification Opportunities for Fidelity Advantage and Simplify Equity

0.92

Correlation Coefficient

Fidelity Advantage  Simplify Equity

Almost no diversification

The 3 months correlation between Fidelity and Simplify is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advantage Ether and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Fidelity Advantage i.e., Fidelity Advantage and Simplify Equity go up and down completely randomly.

Pair Corralation between Fidelity Advantage and Simplify Equity

Given the investment horizon of 90 days Fidelity Advantage Ether is expected to under-perform the Simplify Equity. In addition to that, Fidelity Advantage is 3.62 times more volatile than Simplify Equity PLUS. It trades about -0.08 of its total potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.0 per unit of volatility. If you would invest  3,974  in Simplify Equity PLUS on September 28, 2024 and sell it today you would lose (6.00) from holding Simplify Equity PLUS or give up 0.15% of portfolio value over 90 days.

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

Fidelity Advantage Ether  vs.  Simplify Equity PLUS

Fidelity Advantage Ether

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advantage Ether are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Fidelity Advantage demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Simplify Equity PLUS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Simplify Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Advantage and Simplify Equity

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

The idea behind Fidelity Advantage Ether and Simplify Equity PLUS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.