Correlation Between Fidelity Advisor and Largecap Value

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

By analyzing existing cross correlation between Fidelity Advisor Health and Largecap Value Fund, you can compare the effects of market volatilities on Fidelity Advisor and Largecap Value 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 Largecap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Largecap Value.

Diversification Opportunities for Fidelity Advisor and Largecap Value

0.36

Correlation Coefficient

Fidelity Advisor  Largecap Value

Weak diversification

The 3 months correlation between Fidelity and Largecap is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Health and Largecap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Value 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 Health are associated (or correlated) with Largecap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Value has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Largecap Value go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Largecap Value

Assuming the 90 days horizon Fidelity Advisor Health is expected to generate 1.29 times more return on investment than Largecap Value. However, Fidelity Advisor is 1.29 times more volatile than Largecap Value Fund. It trades about -0.01 of its potential returns per unit of risk. Largecap Value Fund is currently generating about -0.01 per unit of risk. If you would invest  3,900  in Fidelity Advisor Health on December 30, 2024 and sell it today you would lose (31.00) from holding Fidelity Advisor Health or give up 0.79% of portfolio value over 90 days.

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

Fidelity Advisor Health  vs.  Largecap Value Fund

Fidelity Advisor Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advisor Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Largecap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Largecap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Largecap Value 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 Largecap Value

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

The idea behind Fidelity Advisor Health and Largecap Value Fund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.