Correlation Between Fidelity China and Columbia Greater

Can any of the company-specific risk be diversified away by investing in both Fidelity China and Columbia Greater 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 Columbia Greater 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 Columbia Greater China, you can compare the effects of market volatilities on Fidelity China and Columbia Greater 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 Columbia Greater. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity China and Columbia Greater.

Diversification Opportunities for Fidelity China and Columbia Greater

0.94

Correlation Coefficient

Fidelity China  Columbia Greater

Almost no diversification

The 3 months correlation between Fidelity and Columbia is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity China Region and Columbia Greater China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Greater China 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 Columbia Greater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Greater China has no effect on the direction of Fidelity China i.e., Fidelity China and Columbia Greater go up and down completely randomly.

Pair Corralation between Fidelity China and Columbia Greater

Assuming the 90 days horizon Fidelity China Region is expected to generate 0.98 times more return on investment than Columbia Greater. However, Fidelity China Region is 1.02 times less risky than Columbia Greater. It trades about -0.02 of its potential returns per unit of risk. Columbia Greater China is currently generating about -0.05 per unit of risk. If you would invest  3,965  in Fidelity China Region on October 24, 2024 and sell it today you would lose (16.00) from holding Fidelity China Region or give up 0.4% of portfolio value over 90 days.

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

Fidelity China Region  vs.  Columbia Greater China

Fidelity China Region

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Greater China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Greater China has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Greater 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 China and Columbia Greater

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

The idea behind Fidelity China Region and Columbia Greater China 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.