Correlation Between Fidelity Advisor and Small Midcap

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

By analyzing existing cross correlation between Fidelity Advisor Energy and Small Midcap Dividend Income, you can compare the effects of market volatilities on Fidelity Advisor and Small Midcap 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 Small Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Small Midcap.

Diversification Opportunities for Fidelity Advisor and Small Midcap

0.72

Correlation Coefficient

Fidelity Advisor  Small Midcap

Poor diversification

The 3 months correlation between Fidelity and Small is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Energy and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend 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 Energy are associated (or correlated) with Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Small Midcap go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Small Midcap

Assuming the 90 days horizon Fidelity Advisor Energy is expected to generate 0.91 times more return on investment than Small Midcap. However, Fidelity Advisor Energy is 1.1 times less risky than Small Midcap. It trades about 0.08 of its potential returns per unit of risk. Small Midcap Dividend Income is currently generating about -0.01 per unit of risk. If you would invest  4,824  in Fidelity Advisor Energy on October 21, 2024 and sell it today you would earn a total of  242.00  from holding Fidelity Advisor Energy or generate 5.02% return on investment over 90 days.

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

Fidelity Advisor Energy  vs.  Small Midcap Dividend Income

Fidelity Advisor Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Energy are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Midcap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Midcap Dividend Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Small Midcap 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 Small Midcap

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

The idea behind Fidelity Advisor Energy and Small Midcap Dividend Income 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.