Correlation Between Insurance Portfolio and Fidelity Advisor

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

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

Diversification Opportunities for Insurance Portfolio and Fidelity Advisor

0.83

Correlation Coefficient

Insurance Portfolio  Fidelity Advisor

Very poor diversification

The 3 months correlation between Insurance and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Portfolio Insurance and Fidelity Advisor Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Fin and Insurance Portfolio 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 Insurance Portfolio Insurance 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 Fin has no effect on the direction of Insurance Portfolio i.e., Insurance Portfolio and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Insurance Portfolio and Fidelity Advisor

Assuming the 90 days horizon Insurance Portfolio is expected to generate 39.43 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Insurance Portfolio Insurance is 1.29 times less risky than Fidelity Advisor. It trades about 0.01 of its potential returns per unit of risk. Fidelity Advisor Financial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,065  in Fidelity Advisor Financial on September 16, 2024 and sell it today you would earn a total of  410.00  from holding Fidelity Advisor Financial or generate 13.38% return on investment over 90 days.

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

Insurance Portfolio Insurance  vs.  Fidelity Advisor Financial

Insurance Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Advisor Fin

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Financial are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insurance Portfolio and Fidelity Advisor

The main advantage of trading using opposite Insurance Portfolio and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Portfolio 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 Insurance Portfolio Insurance and Fidelity Advisor Financial 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.