Correlation Between Fidelity China and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Fidelity China 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 Fidelity China and Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity China Region and Fidelity Advisor Biotechnology, you can compare the effects of market volatilities on Fidelity China 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 Fidelity China with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity China and Fidelity Advisor.
Diversification Opportunities for Fidelity China and Fidelity Advisor
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fidelity and Fidelity is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity China Region and Fidelity Advisor Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Bio and Fidelity China 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 China Region 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 Bio has no effect on the direction of Fidelity China i.e., Fidelity China and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Fidelity China and Fidelity Advisor
Assuming the 90 days horizon Fidelity China Region is expected to under-perform the Fidelity Advisor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity China Region is 1.17 times less risky than Fidelity Advisor. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Fidelity Advisor Biotechnology is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 3,692 in Fidelity Advisor Biotechnology on August 30, 2024 and sell it today you would lose (241.00) from holding Fidelity Advisor Biotechnology or give up 6.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fidelity China Region vs. Fidelity Advisor Biotechnology
Performance |
| Timeline |
| Fidelity China Region |
| Fidelity Advisor Bio |
Fidelity China and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity China and Fidelity Advisor
The main advantage of trading using opposite Fidelity China and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity China 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.| Fidelity China vs. Fidelity Emerging Asia | Fidelity China vs. Fidelity Emerging Markets | Fidelity China vs. Fidelity Canada Fund | Fidelity China vs. Fidelity Pacific Basin |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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