Correlation Between Fidelity Sustainable and Fidelity Europe

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

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

Diversification Opportunities for Fidelity Sustainable and Fidelity Europe

-0.07

Correlation Coefficient

Fidelity Sustainable  Fidelity Europe

Good diversification

The 3 months correlation between Fidelity and Fidelity is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable EUR and Fidelity Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe Quality and Fidelity Sustainable 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 Sustainable EUR are associated (or correlated) with Fidelity Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe Quality has no effect on the direction of Fidelity Sustainable i.e., Fidelity Sustainable and Fidelity Europe go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Fidelity Europe

Assuming the 90 days trading horizon Fidelity Sustainable EUR is expected to under-perform the Fidelity Europe. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity Sustainable EUR is 4.08 times less risky than Fidelity Europe. The etf trades about -0.45 of its potential returns per unit of risk. The Fidelity Europe Quality is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  806.00  in Fidelity Europe Quality on October 11, 2024 and sell it today you would lose (7.00) from holding Fidelity Europe Quality or give up 0.87% of portfolio value over 90 days.

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

Fidelity Sustainable EUR  vs.  Fidelity Europe Quality

Fidelity Sustainable EUR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable EUR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity Sustainable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity Europe Quality

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fidelity Sustainable and Fidelity Europe

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

The idea behind Fidelity Sustainable EUR and Fidelity Europe Quality 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.