Correlation Between Block and Fidelity Advisor

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

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

Diversification Opportunities for Block and Fidelity Advisor

0.84

Correlation Coefficient

Block  Fidelity Advisor

Very poor diversification

The 3 months correlation between Block and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Fidelity Advisor Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Ind and Block 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 Block Inc 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 Ind has no effect on the direction of Block i.e., Block and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Block and Fidelity Advisor

Allowing for the 90-day total investment horizon Block Inc is expected to generate 2.72 times more return on investment than Fidelity Advisor. However, Block is 2.72 times more volatile than Fidelity Advisor Industrials. It trades about 0.25 of its potential returns per unit of risk. Fidelity Advisor Industrials is currently generating about 0.15 per unit of risk. If you would invest  6,399  in Block Inc on September 13, 2024 and sell it today you would earn a total of  3,420  from holding Block Inc or generate 53.45% return on investment over 90 days.

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

Block Inc  vs.  Fidelity Advisor Industrials

Block Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Advisor Ind

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Industrials are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Block and Fidelity Advisor

The main advantage of trading using opposite Block and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block 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 Block Inc and Fidelity Advisor Industrials 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.