Correlation Between Fidelity Nordic and Fidelity China

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

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

Diversification Opportunities for Fidelity Nordic and Fidelity China

-0.33

Correlation Coefficient

Fidelity Nordic  Fidelity China

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Nordic Fund and Fidelity China Region in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity China Region and Fidelity Nordic 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 Nordic Fund are associated (or correlated) with Fidelity China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity China Region has no effect on the direction of Fidelity Nordic i.e., Fidelity Nordic and Fidelity China go up and down completely randomly.

Pair Corralation between Fidelity Nordic and Fidelity China

Assuming the 90 days horizon Fidelity Nordic Fund is expected to under-perform the Fidelity China. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Nordic Fund is 1.99 times less risky than Fidelity China. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Fidelity China Region is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,571  in Fidelity China Region on September 1, 2024 and sell it today you would earn a total of  337.00  from holding Fidelity China Region or generate 9.44% return on investment over 90 days.

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

Fidelity Nordic Fund  vs.  Fidelity China Region

Fidelity Nordic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity China Region

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity China Region are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity China may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fidelity Nordic and Fidelity China

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

The idea behind Fidelity Nordic Fund and Fidelity China Region 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.