Correlation Between Dow Jones and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Fidelity Advisor Utilities, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fidelity Advisor.
Diversification Opportunities for Dow Jones and Fidelity Advisor
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Fidelity is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fidelity Advisor Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Uti and Dow Jones 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 Dow Jones Industrial 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 Uti has no effect on the direction of Dow Jones i.e., Dow Jones and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Dow Jones and Fidelity Advisor
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.56 times more return on investment than Fidelity Advisor. However, Dow Jones Industrial is 1.77 times less risky than Fidelity Advisor. It trades about -0.02 of its potential returns per unit of risk. Fidelity Advisor Utilities is currently generating about -0.07 per unit of risk. If you would invest 4,429,313 in Dow Jones Industrial on September 12, 2024 and sell it today you would lose (14,457) from holding Dow Jones Industrial or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fidelity Advisor Utilities
Performance |
| Timeline |
Dow Jones and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fidelity Advisor Utilities
Pair trading matchups for Fidelity Advisor
Pair Trading with Dow Jones and Fidelity Advisor
The main advantage of trading using opposite Dow Jones and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Fidelity Advisor vs. Alpine Dynamic Dividend | Fidelity Advisor vs. The Gabelli Utilities | Fidelity Advisor vs. The Gabelli Equity | Fidelity Advisor vs. Hennessy Gas Utility |
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.
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