Correlation Between Fidelity Advisor and Franklin Lifesmart

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

By analyzing existing cross correlation between Fidelity Advisor Gold and Franklin Lifesmart 2045, you can compare the effects of market volatilities on Fidelity Advisor and Franklin Lifesmart 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 Advisor with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Franklin Lifesmart.

Diversification Opportunities for Fidelity Advisor and Franklin Lifesmart

0.51

Correlation Coefficient

Fidelity Advisor  Franklin Lifesmart

Very weak diversification

The 3 months correlation between Fidelity and Franklin is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Gold and Franklin Lifesmart 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2045 and Fidelity Advisor 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 Advisor Gold are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2045 has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Franklin Lifesmart

Assuming the 90 days horizon Fidelity Advisor Gold is expected to generate 2.0 times more return on investment than Franklin Lifesmart. However, Fidelity Advisor is 2.0 times more volatile than Franklin Lifesmart 2045. It trades about -0.09 of its potential returns per unit of risk. Franklin Lifesmart 2045 is currently generating about -0.21 per unit of risk. If you would invest  3,018  in Fidelity Advisor Gold on December 10, 2024 and sell it today you would lose (98.00) from holding Fidelity Advisor Gold or give up 3.25% of portfolio value over 90 days.

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

Fidelity Advisor Gold  vs.  Franklin Lifesmart 2045

Fidelity Advisor Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Gold are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Lifesmart 2045

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Lifesmart 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Franklin Lifesmart 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 Advisor and Franklin Lifesmart

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

The idea behind Fidelity Advisor Gold and Franklin Lifesmart 2045 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.