Correlation Between Fidelity Water and Fidelity Climate

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

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

Diversification Opportunities for Fidelity Water and Fidelity Climate

0.41

Correlation Coefficient

Fidelity Water  Fidelity Climate

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Water Sustainability and Fidelity Climate Action in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Climate Action and Fidelity Water 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 Water Sustainability are associated (or correlated) with Fidelity Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Climate Action has no effect on the direction of Fidelity Water i.e., Fidelity Water and Fidelity Climate go up and down completely randomly.

Pair Corralation between Fidelity Water and Fidelity Climate

Assuming the 90 days horizon Fidelity Water Sustainability is expected to generate 0.74 times more return on investment than Fidelity Climate. However, Fidelity Water Sustainability is 1.34 times less risky than Fidelity Climate. It trades about 0.02 of its potential returns per unit of risk. Fidelity Climate Action is currently generating about -0.11 per unit of risk. If you would invest  1,705  in Fidelity Water Sustainability on December 21, 2024 and sell it today you would earn a total of  11.00  from holding Fidelity Water Sustainability or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Fidelity Water Sustainability  vs.  Fidelity Climate Action

Fidelity Water Susta

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Water Sustainability are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Water is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Climate Action

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Climate Action has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity Water and Fidelity Climate

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

The idea behind Fidelity Water Sustainability and Fidelity Climate Action 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.