Correlation Between Arga Emerging and Fidelity Emerging

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

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

Diversification Opportunities for Arga Emerging and Fidelity Emerging

0.75

Correlation Coefficient

Arga Emerging  Fidelity Emerging

Poor diversification

The 3 months correlation between Arga and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arga Emerging Markets and Fidelity Emerging Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Asia and Arga 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 Arga Emerging Markets are associated (or correlated) with Fidelity Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Emerging Asia has no effect on the direction of Arga Emerging i.e., Arga Emerging and Fidelity Emerging go up and down completely randomly.

Pair Corralation between Arga Emerging and Fidelity Emerging

Assuming the 90 days horizon Arga Emerging is expected to generate 2.91 times less return on investment than Fidelity Emerging. But when comparing it to its historical volatility, Arga Emerging Markets is 1.12 times less risky than Fidelity Emerging. It trades about 0.04 of its potential returns per unit of risk. Fidelity Emerging Asia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,884  in Fidelity Emerging Asia on October 1, 2024 and sell it today you would earn a total of  1,045  from holding Fidelity Emerging Asia or generate 26.91% return on investment over 90 days.

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

Arga Emerging Markets  vs.  Fidelity Emerging Asia

Arga Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arga Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Emerging Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Emerging Asia has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arga Emerging and Fidelity Emerging

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

The idea behind Arga Emerging Markets and Fidelity Emerging Asia 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.