Correlation Between Fidelity Advisor and Ultrashort Emerging

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

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

Diversification Opportunities for Fidelity Advisor and Ultrashort Emerging

-0.05

Correlation Coefficient

Fidelity Advisor  Ultrashort Emerging

Good diversification

The 3 months correlation between FIDELITY and Ultrashort is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Financial and Ultrashort Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Emerging 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 Financial are associated (or correlated) with Ultrashort Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Emerging has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Ultrashort Emerging go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Ultrashort Emerging

Assuming the 90 days horizon Fidelity Advisor Financial is expected to generate 0.39 times more return on investment than Ultrashort Emerging. However, Fidelity Advisor Financial is 2.59 times less risky than Ultrashort Emerging. It trades about 0.0 of its potential returns per unit of risk. Ultrashort Emerging Markets is currently generating about -0.09 per unit of risk. If you would invest  3,630  in Fidelity Advisor Financial on December 23, 2024 and sell it today you would lose (23.00) from holding Fidelity Advisor Financial or give up 0.63% of portfolio value over 90 days.

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

Fidelity Advisor Financial  vs.  Ultrashort Emerging Markets

Fidelity Advisor Fin

Risk-Adjusted Performance

Very Weak

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

Ultrashort Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultrashort Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity Advisor and Ultrashort Emerging

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

The idea behind Fidelity Advisor Financial and Ultrashort Emerging Markets 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.