Correlation Between Fidelity Capital and International Equity
Can any of the company-specific risk be diversified away by investing in both Fidelity Capital and International Equity 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 Fidelity Capital and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Capital Income and The International Equity, you can compare the effects of market volatilities on Fidelity Capital and International Equity 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 Fidelity Capital with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Capital and International Equity.
Diversification Opportunities for Fidelity Capital and International Equity
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fidelity and International is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Capital Income and The International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The International Equity and Fidelity Capital 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 Fidelity Capital Income are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The International Equity has no effect on the direction of Fidelity Capital i.e., Fidelity Capital and International Equity go up and down completely randomly.
Pair Corralation between Fidelity Capital and International Equity
Assuming the 90 days horizon Fidelity Capital is expected to generate 1.06 times less return on investment than International Equity. But when comparing it to its historical volatility, Fidelity Capital Income is 2.84 times less risky than International Equity. It trades about 0.14 of its potential returns per unit of risk. The International Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,101 in The International Equity on September 2, 2024 and sell it today you would earn a total of 263.00 from holding The International Equity or generate 23.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Capital Income vs. The International Equity
Performance |
| Timeline |
| Fidelity Capital Income |
| The International Equity |
Fidelity Capital and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Capital and International Equity
The main advantage of trading using opposite Fidelity Capital and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Capital position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Fidelity Capital vs. Fidelity High Income | Fidelity Capital vs. Fidelity New Markets | Fidelity Capital vs. Fidelity Total Bond | Fidelity Capital vs. Fidelity Balanced Fund |
| International Equity vs. The Eafe Pure | International Equity vs. The Long Term | International Equity vs. Baillie Gifford China | International Equity vs. Baillie Gifford China |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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