Correlation Between Fidelity Advisor and Target 2005

Can any of the company-specific risk be diversified away by investing in both Fidelity Advisor and Target 2005 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 Advisor and Target 2005 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Advisor Health and Target 2005 Fund, you can compare the effects of market volatilities on Fidelity Advisor and Target 2005 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 Advisor with a short position of Target 2005. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Target 2005.

Diversification Opportunities for Fidelity Advisor and Target 2005

0.23

Correlation Coefficient

Fidelity Advisor  Target 2005

Modest diversification

The 3 months correlation between Fidelity and Target is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Health and Target 2005 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 2005 Fund and Fidelity Advisor 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 Advisor Health are associated (or correlated) with Target 2005. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target 2005 Fund has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Target 2005 go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Target 2005

Assuming the 90 days horizon Fidelity Advisor Health is expected to under-perform the Target 2005. In addition to that, Fidelity Advisor is 3.38 times more volatile than Target 2005 Fund. It trades about -0.01 of its total potential returns per unit of risk. Target 2005 Fund is currently generating about 0.15 per unit of volatility. If you would invest  1,158  in Target 2005 Fund on September 3, 2024 and sell it today you would earn a total of  27.00  from holding Target 2005 Fund or generate 2.33% return on investment over 90 days.

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

Fidelity Advisor Health  vs.  Target 2005 Fund

Fidelity Advisor Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Target 2005 Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target 2005 Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target 2005 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Advisor and Target 2005

The main advantage of trading using opposite Fidelity Advisor and Target 2005 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Advisor position performs unexpectedly, Target 2005 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 Target 2005 will offset losses from the drop in Target 2005's long position.

The idea behind Fidelity Advisor Health and Target 2005 Fund 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.