Correlation Between Global X and Fidelity Emerging

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

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

Diversification Opportunities for Global X and Fidelity Emerging

0.44

Correlation Coefficient

Global X  Fidelity Emerging

Very weak diversification

The 3 months correlation between Global and Fidelity is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and Fidelity Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Markets and Global X 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 Global X MSCI 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 Markets has no effect on the direction of Global X i.e., Global X and Fidelity Emerging go up and down completely randomly.

Pair Corralation between Global X and Fidelity Emerging

Given the investment horizon of 90 days Global X is expected to generate 1.46 times less return on investment than Fidelity Emerging. But when comparing it to its historical volatility, Global X MSCI is 1.01 times less risky than Fidelity Emerging. It trades about 0.05 of its potential returns per unit of risk. Fidelity Emerging Markets is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,161  in Fidelity Emerging Markets on September 12, 2024 and sell it today you would earn a total of  479.00  from holding Fidelity Emerging Markets or generate 22.17% return on investment over 90 days.

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

Global X MSCI  vs.  Fidelity Emerging Markets

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Global X is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity Emerging Markets

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Fidelity Emerging is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Fidelity Emerging

The main advantage of trading using opposite Global X and Fidelity Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X MSCI and Fidelity Emerging Markets 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.