Correlation Between Fidelity China and Prudential Core

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

Diversification Opportunities for Fidelity China and Prudential Core

0.75

Correlation Coefficient

Fidelity China  Prudential Core

Poor diversification

The 3 months correlation between Fidelity and Prudential is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity China Region and Prudential Core Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Core Cons 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 Prudential Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Core Cons has no effect on the direction of Fidelity China i.e., Fidelity China and Prudential Core go up and down completely randomly.

Pair Corralation between Fidelity China and Prudential Core

Assuming the 90 days horizon Fidelity China Region is expected to generate 4.73 times more return on investment than Prudential Core. However, Fidelity China is 4.73 times more volatile than Prudential Core Conservative. It trades about 0.06 of its potential returns per unit of risk. Prudential Core Conservative is currently generating about 0.12 per unit of risk. If you would invest  3,811  in Fidelity China Region on December 30, 2024 and sell it today you would earn a total of  188.00  from holding Fidelity China Region or generate 4.93% return on investment over 90 days.

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

Fidelity China Region  vs.  Prudential Core Conservative

Fidelity China Region

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity China Region are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Core Cons

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Core Conservative are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Core 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 Prudential Core

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

The idea behind Fidelity China Region and Prudential Core Conservative 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.