Correlation Between Health Biotchnology and Fidelity Advisor

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

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

Diversification Opportunities for Health Biotchnology and Fidelity Advisor

0.45

Correlation Coefficient

Health Biotchnology  Fidelity Advisor

Very weak diversification

The 3 months correlation between Health and Fidelity is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and Fidelity Advisor Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Gold and Health Biotchnology 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 Health Biotchnology Portfolio 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 Gold has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Health Biotchnology and Fidelity Advisor

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Fidelity Advisor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Biotchnology Portfolio is 2.11 times less risky than Fidelity Advisor. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Fidelity Advisor Gold is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,617  in Fidelity Advisor Gold on November 30, 2024 and sell it today you would earn a total of  279.00  from holding Fidelity Advisor Gold or generate 10.66% return on investment over 90 days.

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

Health Biotchnology Portfolio  vs.  Fidelity Advisor Gold

Health Biotchnology

Risk-Adjusted Performance

Very Weak

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

Fidelity Advisor Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Gold are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Health Biotchnology and Fidelity Advisor

The main advantage of trading using opposite Health Biotchnology and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology 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 Health Biotchnology Portfolio and Fidelity Advisor Gold 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.