Correlation Between Fidelity Pacific and Fidelity Advisor

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

By analyzing existing cross correlation between Fidelity Pacific Basin and Fidelity Advisor Emerging, you can compare the effects of market volatilities on Fidelity Pacific and Fidelity Advisor 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 Pacific with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Pacific and Fidelity Advisor.

Diversification Opportunities for Fidelity Pacific and Fidelity Advisor

0.8

Correlation Coefficient

Fidelity Pacific  Fidelity Advisor

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Pacific Basin and Fidelity Advisor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Emerging and Fidelity Pacific 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 Pacific Basin are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Emerging has no effect on the direction of Fidelity Pacific i.e., Fidelity Pacific and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Fidelity Pacific and Fidelity Advisor

Assuming the 90 days horizon Fidelity Pacific is expected to generate 1.57 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Fidelity Pacific Basin is 1.02 times less risky than Fidelity Advisor. It trades about 0.05 of its potential returns per unit of risk. Fidelity Advisor Emerging is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,662  in Fidelity Advisor Emerging on December 3, 2024 and sell it today you would earn a total of  1,164  from holding Fidelity Advisor Emerging or generate 31.79% return on investment over 90 days.

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

Fidelity Pacific Basin  vs.  Fidelity Advisor Emerging

Fidelity Pacific Basin

Risk-Adjusted Performance

Very Weak

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

Fidelity Advisor Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advisor Emerging has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Fidelity Pacific and Fidelity Advisor

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

The idea behind Fidelity Pacific Basin and Fidelity Advisor Emerging 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.