Correlation Between Short Oil and Fidelity Advisor

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

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

Diversification Opportunities for Short Oil and Fidelity Advisor

-0.87

Correlation Coefficient

Short Oil  Fidelity Advisor

Pay attention - limited upside

The 3 months correlation between Short and Fidelity is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas 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 Short Oil 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 Short Oil Gas 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 Short Oil i.e., Short Oil and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Short Oil and Fidelity Advisor

Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Fidelity Advisor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Oil Gas is 1.06 times less risky than Fidelity Advisor. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Fidelity Advisor Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,599  in Fidelity Advisor Energy on December 30, 2024 and sell it today you would earn a total of  275.00  from holding Fidelity Advisor Energy or generate 5.98% return on investment over 90 days.

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

Short Oil Gas  vs.  Fidelity Advisor Energy

Short Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Oil Gas has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund 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 6 (%) 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 Short Oil and Fidelity Advisor

The main advantage of trading using opposite Short Oil and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil 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 Short Oil Gas 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.