Correlation Between Fidelity Emerging and Fidelity Value

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

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

Diversification Opportunities for Fidelity Emerging and Fidelity Value

0.46

Correlation Coefficient

Fidelity Emerging  Fidelity Value

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Emerging Markets and Fidelity Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Value and Fidelity Emerging 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 Emerging Markets are associated (or correlated) with Fidelity Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Value has no effect on the direction of Fidelity Emerging i.e., Fidelity Emerging and Fidelity Value go up and down completely randomly.

Pair Corralation between Fidelity Emerging and Fidelity Value

Assuming the 90 days horizon Fidelity Emerging Markets is expected to generate 1.17 times more return on investment than Fidelity Value. However, Fidelity Emerging is 1.17 times more volatile than Fidelity Value Fund. It trades about -0.01 of its potential returns per unit of risk. Fidelity Value Fund is currently generating about -0.07 per unit of risk. If you would invest  3,820  in Fidelity Emerging Markets on December 30, 2024 and sell it today you would lose (31.00) from holding Fidelity Emerging Markets or give up 0.81% of portfolio value over 90 days.

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

Fidelity Emerging Markets  vs.  Fidelity Value Fund

Fidelity Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Fidelity Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Emerging and Fidelity Value

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

The idea behind Fidelity Emerging Markets and Fidelity Value Fund 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.