Correlation Between Fidelity Europe and Fidelity International

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

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

Diversification Opportunities for Fidelity Europe and Fidelity International

0.82

Correlation Coefficient

Fidelity Europe  Fidelity International

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Europe Fund and Fidelity International Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Fidelity Europe 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 Europe Fund are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Fidelity Europe i.e., Fidelity Europe and Fidelity International go up and down completely randomly.

Pair Corralation between Fidelity Europe and Fidelity International

Assuming the 90 days horizon Fidelity Europe Fund is expected to generate 0.88 times more return on investment than Fidelity International. However, Fidelity Europe Fund is 1.14 times less risky than Fidelity International. It trades about 0.2 of its potential returns per unit of risk. Fidelity International Capital is currently generating about 0.05 per unit of risk. If you would invest  3,468  in Fidelity Europe Fund on December 30, 2024 and sell it today you would earn a total of  429.00  from holding Fidelity Europe Fund or generate 12.37% return on investment over 90 days.

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

Fidelity Europe Fund  vs.  Fidelity International Capital

Fidelity Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Europe Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Europe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fidelity International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity International Capital are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity International 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 Europe and Fidelity International

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

The idea behind Fidelity Europe Fund and Fidelity International Capital 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 Stocks Directory module to find actively traded stocks across global markets.