Correlation Between Royce Opportunity and Fidelity Advisor

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

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

Diversification Opportunities for Royce Opportunity and Fidelity Advisor

0.89

Correlation Coefficient

Royce Opportunity  Fidelity Advisor

Very poor diversification

The 3 months correlation between ROYCE and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity Fund and Fidelity Advisor Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Fin and Royce Opportunity 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 Royce Opportunity 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 Fin has no effect on the direction of Royce Opportunity i.e., Royce Opportunity and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Royce Opportunity and Fidelity Advisor

Assuming the 90 days horizon Royce Opportunity is expected to generate 1.23 times less return on investment than Fidelity Advisor. In addition to that, Royce Opportunity is 1.01 times more volatile than Fidelity Advisor Financial. It trades about 0.17 of its total potential returns per unit of risk. Fidelity Advisor Financial is currently generating about 0.21 per unit of volatility. If you would invest  3,426  in Fidelity Advisor Financial on September 4, 2024 and sell it today you would earn a total of  615.00  from holding Fidelity Advisor Financial or generate 17.95% return on investment over 90 days.

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

Royce Opportunity Fund  vs.  Fidelity Advisor Financial

Royce Opportunity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Advisor Fin

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Financial are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royce Opportunity and Fidelity Advisor

The main advantage of trading using opposite Royce Opportunity and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Opportunity 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 Royce Opportunity Fund and Fidelity Advisor Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.