Correlation Between Fidelity International and Fidelity Extended

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

By analyzing existing cross correlation between Fidelity International Index and Fidelity Extended Market, you can compare the effects of market volatilities on Fidelity International and Fidelity Extended 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 Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity International and Fidelity Extended.

Diversification Opportunities for Fidelity International and Fidelity Extended

0.16

Correlation Coefficient

Fidelity International  Fidelity Extended

Average diversification

The 3 months correlation between Fidelity and Fidelity is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International Index and Fidelity Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Extended Market 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 Index are associated (or correlated) with Fidelity Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Extended Market has no effect on the direction of Fidelity International i.e., Fidelity International and Fidelity Extended go up and down completely randomly.

Pair Corralation between Fidelity International and Fidelity Extended

Assuming the 90 days horizon Fidelity International Index is expected to generate 0.65 times more return on investment than Fidelity Extended. However, Fidelity International Index is 1.54 times less risky than Fidelity Extended. It trades about 0.11 of its potential returns per unit of risk. Fidelity Extended Market is currently generating about -0.12 per unit of risk. If you would invest  4,908  in Fidelity International Index on December 2, 2024 and sell it today you would earn a total of  229.00  from holding Fidelity International Index or generate 4.67% return on investment over 90 days.

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

Fidelity International Index  vs.  Fidelity Extended Market

Fidelity International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity International Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Extended Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Extended Market 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.

Pair Trading with Fidelity International and Fidelity Extended

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

The idea behind Fidelity International Index and Fidelity Extended Market 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.