Correlation Between Dimensional World and Fidelity International

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

By analyzing existing cross correlation between Dimensional World ex and Fidelity International Multifactor, you can compare the effects of market volatilities on Dimensional World and Fidelity International 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 Dimensional World with a short position of Fidelity International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional World and Fidelity International.

Diversification Opportunities for Dimensional World and Fidelity International

0.96

Correlation Coefficient

Dimensional World  Fidelity International

Almost no diversification

The 3 months correlation between Dimensional and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional World ex and Fidelity International Multifa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Dimensional World 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 Dimensional World ex are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Dimensional World i.e., Dimensional World and Fidelity International go up and down completely randomly.

Pair Corralation between Dimensional World and Fidelity International

Given the investment horizon of 90 days Dimensional World is expected to generate 1.62 times less return on investment than Fidelity International. In addition to that, Dimensional World is 1.17 times more volatile than Fidelity International Multifactor. It trades about 0.02 of its total potential returns per unit of risk. Fidelity International Multifactor is currently generating about 0.04 per unit of volatility. If you would invest  2,599  in Fidelity International Multifactor on October 12, 2024 and sell it today you would earn a total of  146.00  from holding Fidelity International Multifactor or generate 5.62% return on investment over 90 days.

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

Dimensional World ex  vs.  Fidelity International Multifa

Dimensional World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional World ex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dimensional World is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fidelity International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity International Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Fidelity International is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dimensional World and Fidelity International

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

The idea behind Dimensional World ex and Fidelity International Multifactor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.