Correlation Between New Economy and Fidelity Emerging

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

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

Diversification Opportunities for New Economy and Fidelity Emerging

0.46

Correlation Coefficient

New Economy  Fidelity Emerging

Very weak diversification

The 3 months correlation between New and Fidelity is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Fidelity Emerging Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Asia and New Economy 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 New Economy Fund are associated (or correlated) with Fidelity Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Emerging Asia has no effect on the direction of New Economy i.e., New Economy and Fidelity Emerging go up and down completely randomly.

Pair Corralation between New Economy and Fidelity Emerging

Assuming the 90 days horizon New Economy Fund is expected to under-perform the Fidelity Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, New Economy Fund is 1.13 times less risky than Fidelity Emerging. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Fidelity Emerging Asia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,834  in Fidelity Emerging Asia on December 4, 2024 and sell it today you would earn a total of  91.00  from holding Fidelity Emerging Asia or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

New Economy Fund  vs.  Fidelity Emerging Asia

New Economy Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Economy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fidelity Emerging Asia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Emerging Asia has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New Economy and Fidelity Emerging

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

The idea behind New Economy Fund and Fidelity Emerging Asia 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.