Correlation Between Global X and Fidelity Canadian

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

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

Diversification Opportunities for Global X and Fidelity Canadian

0.99

Correlation Coefficient

Global X  Fidelity Canadian

No risk reduction

The 3 months correlation between Global and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Global X SPTSX and Fidelity Canadian High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian High and Global X 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 Global X SPTSX are associated (or correlated) with Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian High has no effect on the direction of Global X i.e., Global X and Fidelity Canadian go up and down completely randomly.

Pair Corralation between Global X and Fidelity Canadian

Assuming the 90 days trading horizon Global X is expected to generate 1.04 times less return on investment than Fidelity Canadian. But when comparing it to its historical volatility, Global X SPTSX is 1.1 times less risky than Fidelity Canadian. It trades about 0.34 of its potential returns per unit of risk. Fidelity Canadian High is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  3,510  in Fidelity Canadian High on September 11, 2024 and sell it today you would earn a total of  374.00  from holding Fidelity Canadian High or generate 10.66% return on investment over 90 days.

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

Global X SPTSX  vs.  Fidelity Canadian High

Global X SPTSX

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SPTSX are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Canadian High

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian High are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and Fidelity Canadian

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

The idea behind Global X SPTSX and Fidelity Canadian High 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.