Correlation Between Invesco Energy and Fidelity Advisor

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

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

Diversification Opportunities for Invesco Energy and Fidelity Advisor

0.8

Correlation Coefficient

Invesco Energy  Fidelity Advisor

Very poor diversification

The 3 months correlation between Invesco and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Fidelity Advisor Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Series and Invesco Energy 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 Invesco Energy Fund 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 Series has no effect on the direction of Invesco Energy i.e., Invesco Energy and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Invesco Energy and Fidelity Advisor

Assuming the 90 days horizon Invesco Energy Fund is expected to generate 0.32 times more return on investment than Fidelity Advisor. However, Invesco Energy Fund is 3.1 times less risky than Fidelity Advisor. It trades about -0.37 of its potential returns per unit of risk. Fidelity Advisor Series is currently generating about -0.19 per unit of risk. If you would invest  2,620  in Invesco Energy Fund on September 27, 2024 and sell it today you would lose (312.00) from holding Invesco Energy Fund or give up 11.91% of portfolio value over 90 days.

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

Invesco Energy Fund  vs.  Fidelity Advisor Series

Invesco Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Advisor Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Series 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 primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Invesco Energy and Fidelity Advisor

The main advantage of trading using opposite Invesco Energy and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Energy 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 Invesco Energy Fund and Fidelity Advisor Series 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.