Correlation Between Fidelity International and Fidelity Emerging
Can any of the company-specific risk be diversified away by investing in both Fidelity International and Fidelity Emerging 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 International and Fidelity Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity International Value and Fidelity Emerging Markets, you can compare the effects of market volatilities on Fidelity International and Fidelity Emerging 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 International with a short position of Fidelity Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity International and Fidelity Emerging.
Diversification Opportunities for Fidelity International and Fidelity Emerging
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International Value and Fidelity Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Markets and Fidelity International 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 International Value are associated (or correlated) with Fidelity Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Emerging Markets has no effect on the direction of Fidelity International i.e., Fidelity International and Fidelity Emerging go up and down completely randomly.
Pair Corralation between Fidelity International and Fidelity Emerging
Assuming the 90 days horizon Fidelity International Value is expected to generate 1.07 times more return on investment than Fidelity Emerging. However, Fidelity International is 1.07 times more volatile than Fidelity Emerging Markets. It trades about -0.17 of its potential returns per unit of risk. Fidelity Emerging Markets is currently generating about -0.3 per unit of risk. If you would invest 1,087 in Fidelity International Value on August 29, 2024 and sell it today you would lose (32.00) from holding Fidelity International Value or give up 2.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity International Value vs. Fidelity Emerging Markets
Performance |
| Timeline |
| Fidelity International |
| Fidelity Emerging Markets |
Fidelity International and Fidelity Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity International and Fidelity Emerging
The main advantage of trading using opposite Fidelity International and Fidelity Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity International position performs unexpectedly, Fidelity Emerging 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 Emerging will offset losses from the drop in Fidelity Emerging's long position.The idea behind Fidelity International Value and Fidelity Emerging Markets 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.
| Fidelity Emerging vs. Fidelity Global Equity | Fidelity Emerging vs. Fidelity Total International | Fidelity Emerging vs. Fidelity International Value |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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