Correlation Between Smallcap World and Fidelity Advisor

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

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

Diversification Opportunities for Smallcap World and Fidelity Advisor

0.67

Correlation Coefficient

Smallcap World  Fidelity Advisor

Poor diversification

The 3 months correlation between Smallcap and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Fidelity Advisor Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Fin and Smallcap World 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 Smallcap World Fund 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 Fin has no effect on the direction of Smallcap World i.e., Smallcap World and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Smallcap World and Fidelity Advisor

Assuming the 90 days horizon Smallcap World Fund is expected to generate 0.76 times more return on investment than Fidelity Advisor. However, Smallcap World Fund is 1.32 times less risky than Fidelity Advisor. It trades about 0.15 of its potential returns per unit of risk. Fidelity Advisor Financial is currently generating about 0.05 per unit of risk. If you would invest  6,379  in Smallcap World Fund on May 14, 2025 and sell it today you would earn a total of  432.00  from holding Smallcap World Fund or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Smallcap World Fund  vs.  Fidelity Advisor Financial

Smallcap World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Smallcap World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Fidelity Advisor Fin

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Financial are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, 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 Smallcap World and Fidelity Advisor

The main advantage of trading using opposite Smallcap World and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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 Smallcap World Fund and Fidelity Advisor Financial 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.