Correlation Between Fidelity Emerging and Fidelity Investment

Can any of the company-specific risk be diversified away by investing in both Fidelity Emerging and Fidelity 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 Emerging and Fidelity Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Emerging Asia and Fidelity Investment Trust, you can compare the effects of market volatilities on Fidelity Emerging and Fidelity 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 Emerging with a short position of Fidelity Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Emerging and Fidelity Investment.

Diversification Opportunities for Fidelity Emerging and Fidelity Investment

0.81

Correlation Coefficient

Fidelity Emerging  Fidelity Investment

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Emerging Asia and Fidelity Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Investment Trust and Fidelity Emerging 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 Emerging Asia are associated (or correlated) with Fidelity Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Investment Trust has no effect on the direction of Fidelity Emerging i.e., Fidelity Emerging and Fidelity Investment go up and down completely randomly.

Pair Corralation between Fidelity Emerging and Fidelity Investment

Assuming the 90 days horizon Fidelity Emerging Asia is expected to generate 5.9 times more return on investment than Fidelity Investment. However, Fidelity Emerging is 5.9 times more volatile than Fidelity Investment Trust. It trades about 0.06 of its potential returns per unit of risk. Fidelity Investment Trust is currently generating about 0.21 per unit of risk. If you would invest  4,271  in Fidelity Emerging Asia on February 9, 2024 and sell it today you would earn a total of  65.00  from holding Fidelity Emerging Asia or generate 1.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fidelity Emerging Asia  vs.  Fidelity Investment Trust

Fidelity Emerging Asia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Asia are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Emerging may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Fidelity Investment Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Investment Trust are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Emerging and Fidelity Investment

The main advantage of trading using opposite Fidelity Emerging and Fidelity Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Emerging position performs unexpectedly, Fidelity 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 Fidelity Investment will offset losses from the drop in Fidelity Investment's long position.

The idea behind Fidelity Emerging Asia and Fidelity Investment Trust 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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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.