Correlation Between Fidelity Global and Fidelity Canadian

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

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

Diversification Opportunities for Fidelity Global and Fidelity Canadian

0.72

Correlation Coefficient

Fidelity Global  Fidelity Canadian

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Global Monthly and Fidelity Canadian Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian Monthly and Fidelity Global 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 Global Monthly are associated (or correlated) with Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian Monthly has no effect on the direction of Fidelity Global i.e., Fidelity Global and Fidelity Canadian go up and down completely randomly.

Pair Corralation between Fidelity Global and Fidelity Canadian

Assuming the 90 days trading horizon Fidelity Global Monthly is expected to generate 1.3 times more return on investment than Fidelity Canadian. However, Fidelity Global is 1.3 times more volatile than Fidelity Canadian Monthly. It trades about 0.08 of its potential returns per unit of risk. Fidelity Canadian Monthly is currently generating about 0.09 per unit of risk. If you would invest  1,140  in Fidelity Global Monthly on September 30, 2024 and sell it today you would earn a total of  254.00  from holding Fidelity Global Monthly or generate 22.28% return on investment over 90 days.

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

Fidelity Global Monthly  vs.  Fidelity Canadian Monthly

Fidelity Global Monthly

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Global Monthly are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity Canadian Monthly

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian Monthly are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Global and Fidelity Canadian

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

The idea behind Fidelity Global Monthly and Fidelity Canadian Monthly 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.