Correlation Between First Asset and Fidelity Global

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

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

Diversification Opportunities for First Asset and Fidelity Global

0.11

Correlation Coefficient

First Asset  Fidelity Global

Average diversification

The 3 months correlation between First and Fidelity is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Energy and Fidelity Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Global Value and First Asset 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 First Asset Energy are associated (or correlated) with Fidelity Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Global Value has no effect on the direction of First Asset i.e., First Asset and Fidelity Global go up and down completely randomly.

Pair Corralation between First Asset and Fidelity Global

Assuming the 90 days trading horizon First Asset is expected to generate 1.77 times less return on investment than Fidelity Global. But when comparing it to its historical volatility, First Asset Energy is 1.46 times less risky than Fidelity Global. It trades about 0.14 of its potential returns per unit of risk. Fidelity Global Value is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  773.00  in Fidelity Global Value on December 30, 2024 and sell it today you would earn a total of  142.00  from holding Fidelity Global Value or generate 18.37% return on investment over 90 days.

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

First Asset Energy  vs.  Fidelity Global Value

First Asset Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fidelity Global Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Global Value are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Fidelity Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Asset and Fidelity Global

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

The idea behind First Asset Energy and Fidelity Global 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.