Correlation Between Fidelity and Fidelity Advisor

Can any of the company-specific risk be diversified away by investing in both Fidelity 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 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 Low Volatility and Fidelity Advisor Sustainability, you can compare the effects of market volatilities on Fidelity 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 with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity and Fidelity Advisor.

Diversification Opportunities for Fidelity and Fidelity Advisor

0.06

Correlation Coefficient

Fidelity  Fidelity Advisor

Significant diversification

The 3 months correlation between Fidelity and Fidelity is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Low Volatility and Fidelity Advisor Sustainabilit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Sus and Fidelity 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 Low Volatility 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 Sus has no effect on the direction of Fidelity i.e., Fidelity and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Fidelity and Fidelity Advisor

Assuming the 90 days horizon Fidelity Low Volatility is expected to generate 0.58 times more return on investment than Fidelity Advisor. However, Fidelity Low Volatility is 1.74 times less risky than Fidelity Advisor. It trades about 0.06 of its potential returns per unit of risk. Fidelity Advisor Sustainability is currently generating about -0.12 per unit of risk. If you would invest  1,195  in Fidelity Low Volatility on December 21, 2024 and sell it today you would earn a total of  28.00  from holding Fidelity Low Volatility or generate 2.34% return on investment over 90 days.

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

Fidelity Low Volatility  vs.  Fidelity Advisor Sustainabilit

Fidelity Low Volatility

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Volatility are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Advisor Sus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advisor Sustainability has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity and Fidelity Advisor

The main advantage of trading using opposite Fidelity and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 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 Low Volatility and Fidelity Advisor Sustainability 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.