Correlation Between Fidelity Emerging and Arga Emerging

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

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

Diversification Opportunities for Fidelity Emerging and Arga Emerging

0.75

Correlation Coefficient

Fidelity Emerging  Arga Emerging

Poor diversification

The 3 months correlation between Fidelity and Arga is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Emerging Asia and Arga Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arga Emerging Markets and Fidelity Emerging 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 Emerging Asia are associated (or correlated) with Arga Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arga Emerging Markets has no effect on the direction of Fidelity Emerging i.e., Fidelity Emerging and Arga Emerging go up and down completely randomly.

Pair Corralation between Fidelity Emerging and Arga Emerging

Assuming the 90 days horizon Fidelity Emerging Asia is expected to generate 1.12 times more return on investment than Arga Emerging. However, Fidelity Emerging is 1.12 times more volatile than Arga Emerging Markets. It trades about 0.09 of its potential returns per unit of risk. Arga Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest  3,884  in Fidelity Emerging Asia on October 1, 2024 and sell it today you would earn a total of  1,045  from holding Fidelity Emerging Asia or generate 26.91% return on investment over 90 days.

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

Fidelity Emerging Asia  vs.  Arga Emerging Markets

Fidelity Emerging Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Emerging Asia has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arga Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arga Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Emerging and Arga Emerging

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

The idea behind Fidelity Emerging Asia and Arga Emerging Markets 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.