Correlation Between Fidelity China and Hansa Investment
Can any of the company-specific risk be diversified away by investing in both Fidelity China and Hansa Investment 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 China and Hansa Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity China Special and Hansa Investment, you can compare the effects of market volatilities on Fidelity China and Hansa Investment 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 China with a short position of Hansa Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity China and Hansa Investment.
Diversification Opportunities for Fidelity China and Hansa Investment
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fidelity and Hansa is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity China Special and Hansa Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansa Investment and Fidelity China 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 China Special are associated (or correlated) with Hansa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansa Investment has no effect on the direction of Fidelity China i.e., Fidelity China and Hansa Investment go up and down completely randomly.
Pair Corralation between Fidelity China and Hansa Investment
Assuming the 90 days trading horizon Fidelity China is expected to generate 2.32 times less return on investment than Hansa Investment. In addition to that, Fidelity China is 1.28 times more volatile than Hansa Investment. It trades about 0.02 of its total potential returns per unit of risk. Hansa Investment is currently generating about 0.06 per unit of volatility. If you would invest 18,997 in Hansa Investment on September 4, 2024 and sell it today you would earn a total of 3,503 from holding Hansa Investment or generate 18.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity China Special vs. Hansa Investment
Performance |
| Timeline |
| Fidelity China Special |
| Hansa Investment |
Fidelity China and Hansa Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity China and Hansa Investment
The main advantage of trading using opposite Fidelity China and Hansa Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity China position performs unexpectedly, Hansa Investment 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 Hansa Investment will offset losses from the drop in Hansa Investment's long position.| Fidelity China vs. Hansa Investment | Fidelity China vs. British American Tobacco | Fidelity China vs. Schroders Investment Trusts | Fidelity China vs. Herald Investment Trust |
| Hansa Investment vs. CATCo Reinsurance Opportunities | Hansa Investment vs. Fair Oaks Income | Hansa Investment vs. Legal General Group | Hansa Investment vs. Intermediate Capital Group |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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