Correlation Between Strategic Allocation and Fidelity Advisor

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

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

Diversification Opportunities for Strategic Allocation and Fidelity Advisor

-0.45

Correlation Coefficient

Strategic Allocation  Fidelity Advisor

Very good diversification

The 3 months correlation between Strategic and Fidelity is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Aggressiv 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 Strategic Allocation 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 Strategic Allocation Aggressive 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 Strategic Allocation i.e., Strategic Allocation and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Strategic Allocation and Fidelity Advisor

Assuming the 90 days horizon Strategic Allocation Aggressive is expected to generate 0.29 times more return on investment than Fidelity Advisor. However, Strategic Allocation Aggressive is 3.46 times less risky than Fidelity Advisor. It trades about 0.11 of its potential returns per unit of risk. Fidelity Advisor Gold is currently generating about -0.04 per unit of risk. If you would invest  844.00  in Strategic Allocation Aggressive on September 16, 2024 and sell it today you would earn a total of  31.00  from holding Strategic Allocation Aggressive or generate 3.67% return on investment over 90 days.

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

Strategic Allocation Aggressiv  vs.  Fidelity Advisor Gold

Strategic Allocation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Aggressive are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Strategic Allocation 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

0 of 100

Very Weak

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

Pair Trading with Strategic Allocation and Fidelity Advisor

The main advantage of trading using opposite Strategic Allocation and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation 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 Strategic Allocation Aggressive 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.