Correlation Between Fidelity Series and Fidelity Emerging

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

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

Diversification Opportunities for Fidelity Series and Fidelity Emerging

0.91

Correlation Coefficient

Fidelity Series  Fidelity Emerging

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series Global and Fidelity Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Markets and Fidelity Series 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 Series Global are associated (or correlated) with Fidelity Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Emerging Markets has no effect on the direction of Fidelity Series i.e., Fidelity Series and Fidelity Emerging go up and down completely randomly.

Pair Corralation between Fidelity Series and Fidelity Emerging

Assuming the 90 days horizon Fidelity Series Global is expected to generate 0.82 times more return on investment than Fidelity Emerging. However, Fidelity Series Global is 1.22 times less risky than Fidelity Emerging. It trades about 0.06 of its potential returns per unit of risk. Fidelity Emerging Markets is currently generating about -0.01 per unit of risk. If you would invest  1,470  in Fidelity Series Global on December 4, 2024 and sell it today you would earn a total of  35.00  from holding Fidelity Series Global or generate 2.38% return on investment over 90 days.

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

Fidelity Series Global  vs.  Fidelity Emerging Markets

Fidelity Series Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Global are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Emerging Markets

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fidelity Series and Fidelity Emerging

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

The idea behind Fidelity Series Global and Fidelity 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.