Correlation Between Dimensional Marketwide and Fidelity International
Can any of the company-specific risk be diversified away by investing in both Dimensional Marketwide and Fidelity International 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 Dimensional Marketwide and Fidelity International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Marketwide Value and Fidelity International High, you can compare the effects of market volatilities on Dimensional Marketwide and Fidelity International 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 Dimensional Marketwide with a short position of Fidelity International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Marketwide and Fidelity International.
Diversification Opportunities for Dimensional Marketwide and Fidelity International
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dimensional and Fidelity is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Marketwide Value and Fidelity International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Dimensional Marketwide 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 Dimensional Marketwide Value are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Dimensional Marketwide i.e., Dimensional Marketwide and Fidelity International go up and down completely randomly.
Pair Corralation between Dimensional Marketwide and Fidelity International
Given the investment horizon of 90 days Dimensional Marketwide Value is expected to generate 1.38 times more return on investment than Fidelity International. However, Dimensional Marketwide is 1.38 times more volatile than Fidelity International High. It trades about 0.23 of its potential returns per unit of risk. Fidelity International High is currently generating about -0.18 per unit of risk. If you would invest 4,178 in Dimensional Marketwide Value on August 30, 2024 and sell it today you would earn a total of 245.00 from holding Dimensional Marketwide Value or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Marketwide Value vs. Fidelity International High
Performance |
| Timeline |
| Dimensional Marketwide |
| Fidelity International |
Dimensional Marketwide and Fidelity International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Marketwide and Fidelity International
The main advantage of trading using opposite Dimensional Marketwide and Fidelity International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Marketwide position performs unexpectedly, Fidelity International 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 International will offset losses from the drop in Fidelity International's long position.The idea behind Dimensional Marketwide Value and Fidelity International High 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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