Correlation Between Fidelity International and Fidelity Salem
Can any of the company-specific risk be diversified away by investing in both Fidelity International and Fidelity Salem 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 Salem 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 Salem Street, you can compare the effects of market volatilities on Fidelity International and Fidelity Salem 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 Salem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity International and Fidelity Salem.
Diversification Opportunities for Fidelity International and Fidelity Salem
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International Value and Fidelity Salem Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Salem Street 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 Salem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Salem Street has no effect on the direction of Fidelity International i.e., Fidelity International and Fidelity Salem go up and down completely randomly.
Pair Corralation between Fidelity International and Fidelity Salem
Assuming the 90 days horizon Fidelity International Value is expected to generate 0.88 times more return on investment than Fidelity Salem. However, Fidelity International Value is 1.14 times less risky than Fidelity Salem. It trades about -0.17 of its potential returns per unit of risk. Fidelity Salem Street is currently generating about -0.25 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 | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fidelity International Value vs. Fidelity Salem Street
Performance |
| Timeline |
| Fidelity International |
| Fidelity Salem Street |
Fidelity International and Fidelity Salem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity International and Fidelity Salem
The main advantage of trading using opposite Fidelity International and Fidelity Salem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity International position performs unexpectedly, Fidelity Salem 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 Salem will offset losses from the drop in Fidelity Salem's long position.The idea behind Fidelity International Value and Fidelity Salem Street 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.
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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