Correlation Between Fidelity Advisor and Capital World

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

Diversification Opportunities for Fidelity Advisor and Capital World

0.38

Correlation Coefficient

Fidelity Advisor  Capital World

Weak diversification

The 3 months correlation between Fidelity and Capital is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Gold and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Capital World go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Capital World

Assuming the 90 days horizon Fidelity Advisor Gold is expected to generate 1.5 times more return on investment than Capital World. However, Fidelity Advisor is 1.5 times more volatile than Capital World Growth. It trades about 0.11 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.05 per unit of risk. If you would invest  2,657  in Fidelity Advisor Gold on November 28, 2024 and sell it today you would earn a total of  265.00  from holding Fidelity Advisor Gold or generate 9.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Fidelity Advisor Gold  vs.  Capital World Growth

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 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Capital World Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital World Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Capital World 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 Capital World

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

The idea behind Fidelity Advisor Gold and Capital World Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.