Correlation Between Us Government and Fidelity Europe
Can any of the company-specific risk be diversified away by investing in both Us Government and Fidelity Europe 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 Us Government and Fidelity Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Fidelity Europe Fund, you can compare the effects of market volatilities on Us Government and Fidelity Europe 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 Us Government with a short position of Fidelity Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Fidelity Europe.
Diversification Opportunities for Us Government and Fidelity Europe
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CGTCX and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Fidelity Europe Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe and Us Government 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 Us Government Securities are associated (or correlated) with Fidelity Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe has no effect on the direction of Us Government i.e., Us Government and Fidelity Europe go up and down completely randomly.
Pair Corralation between Us Government and Fidelity Europe
Assuming the 90 days horizon Us Government is expected to generate 9.89 times less return on investment than Fidelity Europe. But when comparing it to its historical volatility, Us Government Securities is 1.97 times less risky than Fidelity Europe. It trades about 0.01 of its potential returns per unit of risk. Fidelity Europe Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,126 in Fidelity Europe Fund on September 3, 2024 and sell it today you would earn a total of 518.00 from holding Fidelity Europe Fund or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Fidelity Europe Fund
Performance |
| Timeline |
| Us Government Securities |
| Fidelity Europe |
Us Government and Fidelity Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Fidelity Europe
The main advantage of trading using opposite Us Government and Fidelity Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Fidelity Europe 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 Europe will offset losses from the drop in Fidelity Europe's long position.| Us Government vs. Vanguard Gnma Fund | Us Government vs. Vanguard Intermediate Term Government | Us Government vs. Us Government Securities | Us Government vs. Us Government Securities |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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