Correlation Between Xtrackers USD and Fidelity International

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

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

Diversification Opportunities for Xtrackers USD and Fidelity International

0.73

Correlation Coefficient

Xtrackers USD  Fidelity International

Poor diversification

The 3 months correlation between Xtrackers and Fidelity is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers USD High and Fidelity International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Xtrackers USD 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 Xtrackers USD High 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 Xtrackers USD i.e., Xtrackers USD and Fidelity International go up and down completely randomly.

Pair Corralation between Xtrackers USD and Fidelity International

Given the investment horizon of 90 days Xtrackers USD is expected to generate 10.05 times less return on investment than Fidelity International. But when comparing it to its historical volatility, Xtrackers USD High is 2.93 times less risky than Fidelity International. It trades about 0.07 of its potential returns per unit of risk. Fidelity International High is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,930  in Fidelity International High on December 30, 2024 and sell it today you would earn a total of  229.00  from holding Fidelity International High or generate 11.87% return on investment over 90 days.

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

Xtrackers USD High  vs.  Fidelity International High

Xtrackers USD High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers USD High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Xtrackers USD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fidelity International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity International High are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Fidelity International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Xtrackers USD and Fidelity International

The main advantage of trading using opposite Xtrackers USD and Fidelity International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers USD 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 Xtrackers USD High and Fidelity International 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.