Can any of the company-specific risk be diversified away by investing in both Voya Emerging and Fidelity New 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 Voya Emerging and Fidelity New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Voya Emerging Markets and Fidelity New Markets, you can compare the effects of market volatilities on Voya Emerging and Fidelity New 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 Voya Emerging with a short position of Fidelity New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya Emerging and Fidelity New.
Diversification Opportunities for Voya Emerging and Fidelity New
The 3 months correlation between Voya and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Voya Emerging Markets and Fidelity New Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity New Markets and Voya 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 Voya Emerging Markets are associated (or correlated) with Fidelity New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity New Markets has no effect on the direction of Voya Emerging i.e., Voya Emerging and Fidelity New go up and down completely randomly.
Pair Corralation between Voya Emerging and Fidelity New
Assuming the 90 days horizon Voya Emerging is expected to generate 1.27 times less return on investment than Fidelity New. But when comparing it to its historical volatility, Voya Emerging Markets is 2.45 times less risky than Fidelity New. It trades about 0.19 of its potential returns per unit of risk. Fidelity New Markets is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,248 in Fidelity New Markets on March 6, 2024 and sell it today you would earn a total of 7.00 from holding Fidelity New Markets or generate 0.56% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Voya Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Voya Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity New Markets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fidelity New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.