Correlation Between Fidelity Global and Fidelity Europe

Can any of the company-specific risk be diversified away by investing in both Fidelity Global 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 Global 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 Global Qualityome and Fidelity Europe Quality, you can compare the effects of market volatilities on Fidelity Global 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 Global with a short position of Fidelity Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Global and Fidelity Europe.

Diversification Opportunities for Fidelity Global and Fidelity Europe

0.41

Correlation Coefficient

Fidelity Global  Fidelity Europe

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Global Qualityome 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 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 Qualityome 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 Global i.e., Fidelity Global and Fidelity Europe go up and down completely randomly.

Pair Corralation between Fidelity Global and Fidelity Europe

Assuming the 90 days trading horizon Fidelity Global Qualityome is expected to under-perform the Fidelity Europe. In addition to that, Fidelity Global is 1.22 times more volatile than Fidelity Europe Quality. It trades about -0.17 of its total potential returns per unit of risk. Fidelity Europe Quality is currently generating about -0.08 per unit of volatility. If you would invest  807.00  in Fidelity Europe Quality on October 12, 2024 and sell it today you would lose (8.00) from holding Fidelity Europe Quality or give up 0.99% of portfolio value over 90 days.

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

Fidelity Global Qualityome  vs.  Fidelity Europe Quality

Fidelity Global Qual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Global Qualityome has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fidelity Global 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 Global and Fidelity Europe

The main advantage of trading using opposite Fidelity Global and Fidelity Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Global 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 Global Qualityome 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.