Correlation Between Fidelity Value and Fidelity International

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

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

Diversification Opportunities for Fidelity Value and Fidelity International

-0.34

Correlation Coefficient

Fidelity Value  Fidelity International

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Factor and Fidelity International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Fidelity Value 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 Value Factor are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Fidelity Value i.e., Fidelity Value and Fidelity International go up and down completely randomly.

Pair Corralation between Fidelity Value and Fidelity International

Given the investment horizon of 90 days Fidelity Value Factor is expected to under-perform the Fidelity International. In addition to that, Fidelity Value is 1.01 times more volatile than Fidelity International Value. It trades about -0.04 of its total potential returns per unit of risk. Fidelity International Value is currently generating about 0.23 per unit of volatility. If you would invest  2,410  in Fidelity International Value on December 27, 2024 and sell it today you would earn a total of  311.00  from holding Fidelity International Value or generate 12.9% return on investment over 90 days.

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

Fidelity Value Factor  vs.  Fidelity International Value

Fidelity Value Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fidelity Value is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fidelity International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity International Value are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Fidelity International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Value and Fidelity International

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

The idea behind Fidelity Value Factor and Fidelity International Value 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .