Correlation Between Fidelity Sustainable and Fidelity Climate

Can any of the company-specific risk be diversified away by investing in both Fidelity Sustainable 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 Sustainable 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 Sustainable International and Fidelity Climate Action, you can compare the effects of market volatilities on Fidelity Sustainable 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 Sustainable with a short position of Fidelity Climate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Sustainable and Fidelity Climate.

Diversification Opportunities for Fidelity Sustainable and Fidelity Climate

-0.35

Correlation Coefficient

Fidelity Sustainable  Fidelity Climate

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable Internati 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 Sustainable 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 Sustainable International 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 Sustainable i.e., Fidelity Sustainable and Fidelity Climate go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Fidelity Climate

Assuming the 90 days horizon Fidelity Sustainable International is expected to generate 0.81 times more return on investment than Fidelity Climate. However, Fidelity Sustainable International is 1.23 times less risky than Fidelity Climate. It trades about 0.12 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  940.00  in Fidelity Sustainable International on December 21, 2024 and sell it today you would earn a total of  62.00  from holding Fidelity Sustainable International or generate 6.6% return on investment over 90 days.

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

Fidelity Sustainable Internati  vs.  Fidelity Climate Action

Fidelity Sustainable

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable International are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Sustainable may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Sustainable and Fidelity Climate

The main advantage of trading using opposite Fidelity Sustainable and Fidelity Climate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Sustainable 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 Sustainable International 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.