Correlation Between Fidelity China and Fidelity Nordic

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

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

Diversification Opportunities for Fidelity China and Fidelity Nordic

-0.33

Correlation Coefficient

Fidelity China  Fidelity Nordic

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity China Region and Fidelity Nordic Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Nordic and Fidelity China 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 China Region are associated (or correlated) with Fidelity Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Nordic has no effect on the direction of Fidelity China i.e., Fidelity China and Fidelity Nordic go up and down completely randomly.

Pair Corralation between Fidelity China and Fidelity Nordic

Assuming the 90 days horizon Fidelity China Region is expected to under-perform the Fidelity Nordic. In addition to that, Fidelity China is 1.37 times more volatile than Fidelity Nordic Fund. It trades about -0.12 of its total potential returns per unit of risk. Fidelity Nordic Fund is currently generating about -0.1 per unit of volatility. If you would invest  6,553  in Fidelity Nordic Fund on September 1, 2024 and sell it today you would lose (159.00) from holding Fidelity Nordic Fund or give up 2.43% of portfolio value over 90 days.

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

Fidelity China Region  vs.  Fidelity Nordic Fund

Fidelity China Region

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity China Region are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity China may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Fidelity Nordic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Nordic Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity China and Fidelity Nordic

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

The idea behind Fidelity China Region and Fidelity Nordic 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..