Correlation Between Fidelity International and Wealthsimple Developed

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

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

Diversification Opportunities for Fidelity International and Wealthsimple Developed

0.71

Correlation Coefficient

Fidelity International  Wealthsimple Developed

Poor diversification

The 3 months correlation between Fidelity and Wealthsimple is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International High and Wealthsimple Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple Developed and Fidelity International 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 International High are associated (or correlated) with Wealthsimple Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple Developed has no effect on the direction of Fidelity International i.e., Fidelity International and Wealthsimple Developed go up and down completely randomly.

Pair Corralation between Fidelity International and Wealthsimple Developed

Assuming the 90 days trading horizon Fidelity International High is expected to generate 1.1 times more return on investment than Wealthsimple Developed. However, Fidelity International is 1.1 times more volatile than Wealthsimple Developed Markets. It trades about 0.06 of its potential returns per unit of risk. Wealthsimple Developed Markets is currently generating about 0.05 per unit of risk. If you would invest  3,224  in Fidelity International High on October 22, 2024 and sell it today you would earn a total of  765.00  from holding Fidelity International High or generate 23.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Fidelity International High  vs.  Wealthsimple Developed Markets

Fidelity International

Risk-Adjusted Performance

6 of 100

Modest

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

Wealthsimple Developed

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Developed Markets are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wealthsimple Developed 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 International and Wealthsimple Developed

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

The idea behind Fidelity International High and Wealthsimple Developed 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.