Correlation Between Quantitative and Fidelity Advisor

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

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

Diversification Opportunities for Quantitative and Fidelity Advisor

0.55

Correlation Coefficient

Quantitative  Fidelity Advisor

Very weak diversification

The 3 months correlation between Quantitative and Fidelity is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and Fidelity Advisor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Energy and Quantitative 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 Quantitative Longshort Equity 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 Energy has no effect on the direction of Quantitative i.e., Quantitative and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Quantitative and Fidelity Advisor

Assuming the 90 days horizon Quantitative is expected to generate 59.29 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Quantitative Longshort Equity is 3.24 times less risky than Fidelity Advisor. It trades about 0.01 of its potential returns per unit of risk. Fidelity Advisor Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,584  in Fidelity Advisor Energy on December 24, 2024 and sell it today you would earn a total of  335.00  from holding Fidelity Advisor Energy or generate 7.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Quantitative Longshort Equity  vs.  Fidelity Advisor Energy

Quantitative Longshort

Risk-Adjusted Performance

Very Weak

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

Fidelity Advisor Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Energy are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Quantitative and Fidelity Advisor

The main advantage of trading using opposite Quantitative and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative 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 Quantitative Longshort Equity and Fidelity Advisor Energy 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.