Correlation Between Fidelity Advisor and State Street

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

Diversification Opportunities for Fidelity Advisor and State Street

0.48

Correlation Coefficient

Fidelity Advisor  State Street

Very weak diversification

The 3 months correlation between Fidelity and State is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Gold and State Street Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Aggregate 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Aggregate has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and State Street go up and down completely randomly.

Pair Corralation between Fidelity Advisor and State Street

Assuming the 90 days horizon Fidelity Advisor Gold is expected to under-perform the State Street. In addition to that, Fidelity Advisor is 5.64 times more volatile than State Street Aggregate. It trades about -0.1 of its total potential returns per unit of risk. State Street Aggregate is currently generating about -0.05 per unit of volatility. If you would invest  8,564  in State Street Aggregate on October 20, 2024 and sell it today you would lose (82.00) from holding State Street Aggregate or give up 0.96% 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.  State Street Aggregate

Fidelity Advisor Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

State Street Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Aggregate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, State Street 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 State Street

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

The idea behind Fidelity Advisor Gold and State Street Aggregate 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.