Correlation Between Western Assets and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Western Assets 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 Western Assets and Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Assets Emerging and Fidelity Advisor Energy, you can compare the effects of market volatilities on Western Assets 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 Western Assets with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Fidelity Advisor.
Diversification Opportunities for Western Assets and Fidelity Advisor
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Fidelity is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging 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 Western Assets 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 Western Assets Emerging 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 Western Assets i.e., Western Assets and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Western Assets and Fidelity Advisor
Assuming the 90 days horizon Western Assets is expected to generate 4.54 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Western Assets Emerging is 2.77 times less risky than Fidelity Advisor. It trades about 0.16 of its potential returns per unit of risk. Fidelity Advisor Energy is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,510 in Fidelity Advisor Energy on September 4, 2024 and sell it today you would earn a total of 266.00 from holding Fidelity Advisor Energy or generate 5.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Western Assets Emerging vs. Fidelity Advisor Energy
Performance |
| Timeline |
| Western Assets Emerging |
| Fidelity Advisor Energy |
Western Assets and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Fidelity Advisor
The main advantage of trading using opposite Western Assets and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets 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.| Western Assets vs. Heartland Value Plus | Western Assets vs. Royce Opportunity Fund | Western Assets vs. Royce Opportunity Fund | Western Assets vs. Queens Road Small |
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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 Valuation module to check real value of public entities based on technical and fundamental data.
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