Correlation Between Fidelity International and Fidelity Limited

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

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

Diversification Opportunities for Fidelity International and Fidelity Limited

0.6

Correlation Coefficient

Fidelity International  Fidelity Limited

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International Value and Fidelity Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Limited Term and Fidelity International 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 International Value are associated (or correlated) with Fidelity Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Limited Term has no effect on the direction of Fidelity International i.e., Fidelity International and Fidelity Limited go up and down completely randomly.

Pair Corralation between Fidelity International and Fidelity Limited

Given the investment horizon of 90 days Fidelity International Value is expected to generate 4.45 times more return on investment than Fidelity Limited. However, Fidelity International is 4.45 times more volatile than Fidelity Limited Term. It trades about 0.06 of its potential returns per unit of risk. Fidelity Limited Term is currently generating about 0.12 per unit of risk. If you would invest  1,981  in Fidelity International Value on September 17, 2024 and sell it today you would earn a total of  527.00  from holding Fidelity International Value or generate 26.6% return on investment over 90 days.

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

Fidelity International Value  vs.  Fidelity Limited Term

Fidelity International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity International Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Limited Term has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity Limited is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity International and Fidelity Limited

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

The idea behind Fidelity International Value and Fidelity Limited Term 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 Transaction History module to view history of all your transactions and understand their impact on performance.