Correlation Between Biotechnology Fund and Fidelity Advisor

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

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

Diversification Opportunities for Biotechnology Fund and Fidelity Advisor

-0.4

Correlation Coefficient

Biotechnology Fund  Fidelity Advisor

Very good diversification

The 3 months correlation between Biotechnology and Fidelity is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Fidelity Advisor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Tec and Biotechnology Fund 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 Biotechnology Fund Class 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 Tec has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Biotechnology Fund and Fidelity Advisor

Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Fidelity Advisor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Biotechnology Fund Class is 1.15 times less risky than Fidelity Advisor. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Fidelity Advisor Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,651  in Fidelity Advisor Technology on September 3, 2024 and sell it today you would earn a total of  1,905  from holding Fidelity Advisor Technology or generate 15.06% return on investment over 90 days.

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

Biotechnology Fund Class  vs.  Fidelity Advisor Technology

Biotechnology Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Advisor Tec

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Technology are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotechnology Fund and Fidelity Advisor

The main advantage of trading using opposite Biotechnology Fund and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund 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 Biotechnology Fund Class and Fidelity Advisor Technology 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.