Correlation Between Fidelity Emerging and Fidelity Europe

Can any of the company-specific risk be diversified away by investing in both Fidelity Emerging and Fidelity Europe 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 Europe 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 Europe Fund, you can compare the effects of market volatilities on Fidelity Emerging and Fidelity Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Emerging and Fidelity Europe.

Diversification Opportunities for Fidelity Emerging and Fidelity Europe

0.84

Correlation Coefficient

Fidelity Emerging  Fidelity Europe

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Emerging Asia and Fidelity Europe Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe has no effect on the direction of Fidelity Emerging i.e., Fidelity Emerging and Fidelity Europe go up and down completely randomly.

Pair Corralation between Fidelity Emerging and Fidelity Europe

Assuming the 90 days horizon Fidelity Emerging is expected to generate 1.01 times less return on investment than Fidelity Europe. In addition to that, Fidelity Emerging is 1.3 times more volatile than Fidelity Europe Fund. It trades about 0.07 of its total potential returns per unit of risk. Fidelity Europe Fund is currently generating about 0.1 per unit of volatility. If you would invest  2,628  in Fidelity Europe Fund on February 9, 2024 and sell it today you would earn a total of  1,061  from holding Fidelity Europe Fund or generate 40.37% 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 Europe Fund

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 Europe

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Europe Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Europe may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Fidelity Emerging and Fidelity Europe

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

The idea behind Fidelity Emerging Asia and Fidelity Europe Fund 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.