Correlation Between Westwood Quality and Fidelity Advisor

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

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

Diversification Opportunities for Westwood Quality and Fidelity Advisor

-0.69

Correlation Coefficient

Westwood Quality  Fidelity Advisor

Excellent diversification

The 3 months correlation between Westwood and Fidelity is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Quality Value 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 Westwood Quality 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 Westwood Quality Value 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 Westwood Quality i.e., Westwood Quality and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Westwood Quality and Fidelity Advisor

Assuming the 90 days horizon Westwood Quality is expected to generate 3.24 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Westwood Quality Value is 2.64 times less risky than Fidelity Advisor. It trades about 0.25 of its potential returns per unit of risk. Fidelity Advisor Gold is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,443  in Fidelity Advisor Gold on December 30, 2024 and sell it today you would earn a total of  831.00  from holding Fidelity Advisor Gold or generate 34.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	46.77%
Values	Daily Returns

Westwood Quality Value  vs.  Fidelity Advisor Gold

Westwood Quality Value

Risk-Adjusted Performance

Solid

Over the last 90 days Westwood Quality Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak fundamental indicators, Westwood Quality may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fidelity Advisor Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Gold are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westwood Quality and Fidelity Advisor

The main advantage of trading using opposite Westwood Quality and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Quality 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 Westwood Quality Value 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.