Correlation Between Fidelity Advisor and Franklin Liberty

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

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

Diversification Opportunities for Fidelity Advisor and Franklin Liberty

0.74

Correlation Coefficient

Fidelity Advisor  Franklin Liberty

Poor diversification

The 3 months correlation between Fidelity and Franklin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Sustainable and Franklin Liberty Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Ultra and Fidelity Advisor 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 Advisor Sustainable are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Ultra has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Franklin Liberty go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Franklin Liberty

Assuming the 90 days horizon Fidelity Advisor is expected to generate 1.7 times less return on investment than Franklin Liberty. But when comparing it to its historical volatility, Fidelity Advisor Sustainable is 1.18 times less risky than Franklin Liberty. It trades about 0.18 of its potential returns per unit of risk. Franklin Liberty Ultra is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,475  in Franklin Liberty Ultra on January 20, 2024 and sell it today you would earn a total of  13.00  from holding Franklin Liberty Ultra or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Fidelity Advisor Sustainable  vs.  Franklin Liberty Ultra

Fidelity Advisor Sus

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Sustainable are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Liberty Ultra

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Ultra are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidelity Advisor and Franklin Liberty

The main advantage of trading using opposite Fidelity Advisor and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Advisor position performs unexpectedly, Franklin Liberty 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 Franklin Liberty will offset losses from the drop in Franklin Liberty's long position.

The idea behind Fidelity Advisor Sustainable and Franklin Liberty Ultra 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.