Correlation Between New Perspective and Fidelity Worldwide
Can any of the company-specific risk be diversified away by investing in both New Perspective and Fidelity Worldwide 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 New Perspective and Fidelity Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Perspective Fund and Fidelity Worldwide Fund, you can compare the effects of market volatilities on New Perspective and Fidelity Worldwide 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 New Perspective with a short position of Fidelity Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Fidelity Worldwide.
Diversification Opportunities for New Perspective and Fidelity Worldwide
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Fidelity Worldwide Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Worldwide and New Perspective 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 New Perspective Fund are associated (or correlated) with Fidelity Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Worldwide has no effect on the direction of New Perspective i.e., New Perspective and Fidelity Worldwide go up and down completely randomly.
Pair Corralation between New Perspective and Fidelity Worldwide
Assuming the 90 days horizon New Perspective is expected to generate 1.32 times less return on investment than Fidelity Worldwide. But when comparing it to its historical volatility, New Perspective Fund is 1.21 times less risky than Fidelity Worldwide. It trades about 0.09 of its potential returns per unit of risk. Fidelity Worldwide Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,525 in Fidelity Worldwide Fund on September 3, 2024 and sell it today you would earn a total of 1,445 from holding Fidelity Worldwide Fund or generate 57.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. Fidelity Worldwide Fund
Performance |
| Timeline |
| New Perspective |
| Fidelity Worldwide |
New Perspective and Fidelity Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Fidelity Worldwide
The main advantage of trading using opposite New Perspective and Fidelity Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Fidelity Worldwide 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 Worldwide will offset losses from the drop in Fidelity Worldwide's long position.| New Perspective vs. New World Fund | New Perspective vs. Capital World Growth | New Perspective vs. Smallcap World Fund | New Perspective vs. Investment Of America |
| Fidelity Worldwide vs. American Funds New | Fidelity Worldwide vs. American Funds New | Fidelity Worldwide vs. New Perspective Fund | Fidelity Worldwide vs. New Perspective Fund |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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