Correlation Between Fidelity Advisor and Small Cap

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

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

Diversification Opportunities for Fidelity Advisor and Small Cap

0.29

Correlation Coefficient

Fidelity Advisor  Small Cap

Modest diversification

The 3 months correlation between Fidelity and Small is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Diversified and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Diversified are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Small Cap go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Small Cap

Assuming the 90 days horizon Fidelity Advisor Diversified is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Advisor Diversified is 1.46 times less risky than Small Cap. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Small Cap Value Fund is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,008  in Small Cap Value Fund on September 25, 2024 and sell it today you would lose (281.00) from holding Small Cap Value Fund or give up 7.01% of portfolio value over 90 days.

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

Fidelity Advisor Diversified  vs.  Small Cap Value Fund

Fidelity Advisor Div

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Advisor Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Advisor and Small Cap

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

The idea behind Fidelity Advisor Diversified and Small Cap Value 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.