Correlation Between Us Government and Fidelity Advisor

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

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

Diversification Opportunities for Us Government and Fidelity Advisor

0.47

Correlation Coefficient

Us Government  Fidelity Advisor

Very weak diversification

The 3 months correlation between RGVBX and Fidelity is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Us Government and Fidelity Advisor

Assuming the 90 days horizon Us Government Securities is expected to generate 0.26 times more return on investment than Fidelity Advisor. However, Us Government Securities is 3.9 times less risky than Fidelity Advisor. It trades about -0.43 of its potential returns per unit of risk. Fidelity Advisor Energy is currently generating about -0.12 per unit of risk. If you would invest  1,192  in Us Government Securities on October 7, 2024 and sell it today you would lose (27.00) from holding Us Government Securities or give up 2.27% of portfolio value over 90 days.

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

Us Government Securities  vs.  Fidelity Advisor Energy

Us Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Us Government 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

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Energy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators 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 Us Government and Fidelity Advisor

The main advantage of trading using opposite Us Government and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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 Us Government Securities 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.