Correlation Between MicroSectors FANG and Fidelity Advisor

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

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

Diversification Opportunities for MicroSectors FANG and Fidelity Advisor

0.69

Correlation Coefficient

MicroSectors FANG  Fidelity Advisor

Poor diversification

The 3 months correlation between MicroSectors and Fidelity is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Fidelity Advisor Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Stock and MicroSectors FANG 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 MicroSectors FANG Index 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 Stock has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Fidelity Advisor go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Fidelity Advisor

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 4.57 times more return on investment than Fidelity Advisor. However, MicroSectors FANG is 4.57 times more volatile than Fidelity Advisor Stock. It trades about 0.07 of its potential returns per unit of risk. Fidelity Advisor Stock is currently generating about 0.02 per unit of risk. If you would invest  9,950  in MicroSectors FANG Index on January 20, 2024 and sell it today you would earn a total of  19,050  from holding MicroSectors FANG Index or generate 191.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

MicroSectors FANG Index  vs.  Fidelity Advisor Stock

MicroSectors FANG Index

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Advisor Stock

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Stock are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and Fidelity Advisor

The main advantage of trading using opposite MicroSectors FANG and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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 MicroSectors FANG Index and Fidelity Advisor Stock 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.