Correlation Between Fidelity Europe and Fidelity Overseas

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

Diversification Opportunities for Fidelity Europe and Fidelity Overseas

0.97

Correlation Coefficient

Fidelity Europe  Fidelity Overseas

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Europe Fund and Fidelity Overseas Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Overseas 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 Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Overseas has no effect on the direction of Fidelity Europe i.e., Fidelity Europe and Fidelity Overseas go up and down completely randomly.

Pair Corralation between Fidelity Europe and Fidelity Overseas

Assuming the 90 days horizon Fidelity Europe Fund is expected to generate 1.0 times more return on investment than Fidelity Overseas. However, Fidelity Europe Fund is 1.0 times less risky than Fidelity Overseas. It trades about 0.21 of its potential returns per unit of risk. Fidelity Overseas Fund is currently generating about 0.14 per unit of risk. If you would invest  3,468  in Fidelity Europe Fund on December 28, 2024 and sell it today you would earn a total of  444.00  from holding Fidelity Europe Fund or generate 12.8% return on investment over 90 days.

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

Fidelity Europe Fund  vs.  Fidelity Overseas Fund

Fidelity Europe

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Europe Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Overseas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Overseas Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Overseas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fidelity Europe and Fidelity Overseas

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

The idea behind Fidelity Europe Fund and Fidelity Overseas 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..