Correlation Between Fidelity Diversified and Fidelity Advisor

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

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

Diversification Opportunities for Fidelity Diversified and Fidelity Advisor

-0.27

Correlation Coefficient

Fidelity Diversified  Fidelity Advisor

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Diversified Internati and Fidelity Advisor Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Value and Fidelity Diversified 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 Fidelity Diversified International 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 Value has no effect on the direction of Fidelity Diversified i.e., Fidelity Diversified and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Fidelity Diversified and Fidelity Advisor

Assuming the 90 days horizon Fidelity Diversified International is expected to under-perform the Fidelity Advisor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Diversified International is 1.13 times less risky than Fidelity Advisor. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Fidelity Advisor Value is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,118  in Fidelity Advisor Value on September 3, 2024 and sell it today you would earn a total of  546.00  from holding Fidelity Advisor Value or generate 10.67% return on investment over 90 days.

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

Fidelity Diversified Internati  vs.  Fidelity Advisor Value

Fidelity Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Advisor Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Value are ranked lower than 13 (%) 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 January 2025.

Pair Trading with Fidelity Diversified and Fidelity Advisor

The main advantage of trading using opposite Fidelity Diversified and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Diversified 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 Fidelity Diversified International and Fidelity Advisor Value 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.