Correlation Between Fidelity Natural and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Fidelity Natural 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 Natural 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 Natural Resources and Fidelity Advisor Energy, you can compare the effects of market volatilities on Fidelity Natural 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 Natural with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Natural and Fidelity Advisor.
Diversification Opportunities for Fidelity Natural and Fidelity Advisor
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Natural Resources and Fidelity Advisor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Energy and Fidelity Natural 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 Natural Resources 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 Energy has no effect on the direction of Fidelity Natural i.e., Fidelity Natural and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Fidelity Natural and Fidelity Advisor
Assuming the 90 days horizon Fidelity Natural is expected to generate 1.1 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Fidelity Natural Resources is 1.08 times less risky than Fidelity Advisor. It trades about 0.03 of its potential returns per unit of risk. Fidelity Advisor Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,385 in Fidelity Advisor Energy on October 25, 2024 and sell it today you would earn a total of 636.00 from holding Fidelity Advisor Energy or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fidelity Natural Resources vs. Fidelity Advisor Energy
Performance |
| Timeline |
| Fidelity Natural Res |
| Fidelity Advisor Energy |
Fidelity Natural and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Natural and Fidelity Advisor
The main advantage of trading using opposite Fidelity Natural and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Natural 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 Fidelity Natural Resources and Fidelity Advisor Energy 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.
| Fidelity Advisor vs. Fidelity Advisor Energy | Fidelity Advisor vs. Fidelity Advisor Technology | Fidelity Advisor vs. Fidelity Advisor Health | Fidelity Advisor vs. Oil Gas Ultrasector |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |