Correlation Between Dow Jones and Fidelity Overseas
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fidelity Overseas 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 Dow Jones and Fidelity Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Fidelity Overseas Fund, you can compare the effects of market volatilities on Dow Jones and Fidelity Overseas 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 Dow Jones with a short position of Fidelity Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fidelity Overseas.
Diversification Opportunities for Dow Jones and Fidelity Overseas
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Fidelity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fidelity Overseas Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Overseas and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Fidelity Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Overseas has no effect on the direction of Dow Jones i.e., Dow Jones and Fidelity Overseas go up and down completely randomly.
Pair Corralation between Dow Jones and Fidelity Overseas
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.85 times more return on investment than Fidelity Overseas. However, Dow Jones Industrial is 1.18 times less risky than Fidelity Overseas. It trades about 0.09 of its potential returns per unit of risk. Fidelity Overseas Fund is currently generating about 0.03 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on November 28, 2024 and sell it today you would earn a total of 505,013 from holding Dow Jones Industrial or generate 13.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.46% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fidelity Overseas Fund
Performance |
| Timeline |
Dow Jones and Fidelity Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fidelity Overseas Fund
Pair trading matchups for Fidelity Overseas
Pair Trading with Dow Jones and Fidelity Overseas
The main advantage of trading using opposite Dow Jones and Fidelity Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fidelity Overseas 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 Overseas will offset losses from the drop in Fidelity Overseas' long position.| Dow Jones vs. Gladstone Investment | Dow Jones vs. BW Offshore Limited | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. Aperture Health |
| Fidelity Overseas vs. Fidelity Equity Income Fund | Fidelity Overseas vs. Fidelity Europe Fund | Fidelity Overseas vs. Fidelity Pacific Basin | Fidelity Overseas vs. Fidelity International Capital |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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