Correlation Between Consumer Discretionary and Fidelity Advisor

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

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

Diversification Opportunities for Consumer Discretionary and Fidelity Advisor

0.98

Correlation Coefficient

Consumer Discretionary  Fidelity Advisor

Almost no diversification

The 3 months correlation between Consumer and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Portfol and Fidelity Advisor Sumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Sumer and Consumer Discretionary 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 Consumer Discretionary Portfolio 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 Sumer has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Consumer Discretionary and Fidelity Advisor

Assuming the 90 days horizon Consumer Discretionary Portfolio is expected to generate 1.0 times more return on investment than Fidelity Advisor. However, Consumer Discretionary Portfolio is 1.0 times less risky than Fidelity Advisor. It trades about -0.16 of its potential returns per unit of risk. Fidelity Advisor Sumer is currently generating about -0.17 per unit of risk. If you would invest  6,869  in Consumer Discretionary Portfolio on December 30, 2024 and sell it today you would lose (999.00) from holding Consumer Discretionary Portfolio or give up 14.54% of portfolio value over 90 days.

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

Consumer Discretionary Portfol  vs.  Fidelity Advisor Sumer

Consumer Discretionary

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumer Discretionary Portfolio 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 basic 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.

Fidelity Advisor Sumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advisor Sumer 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 basic 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 Consumer Discretionary and Fidelity Advisor

The main advantage of trading using opposite Consumer Discretionary and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary 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 Consumer Discretionary Portfolio and Fidelity Advisor Sumer 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.