Correlation Between Sp 500 and Fidelity Emerging

Can any of the company-specific risk be diversified away by investing in both Sp 500 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 Sp 500 and Fidelity Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp 500 Index and Fidelity Emerging Asia, you can compare the effects of market volatilities on Sp 500 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 Sp 500 with a short position of Fidelity Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Fidelity Emerging.

Diversification Opportunities for Sp 500 and Fidelity Emerging

-0.42

Correlation Coefficient

Sp 500  Fidelity Emerging

Very good diversification

The 3 months correlation between USPRX and FIDELITY is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index 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 Sp 500 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 Sp 500 Index 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 Sp 500 i.e., Sp 500 and Fidelity Emerging go up and down completely randomly.

Pair Corralation between Sp 500 and Fidelity Emerging

Assuming the 90 days horizon Sp 500 Index is expected to under-perform the Fidelity Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sp 500 Index is 1.23 times less risky than Fidelity Emerging. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Fidelity Emerging Asia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,895  in Fidelity Emerging Asia on December 29, 2024 and sell it today you would earn a total of  248.00  from holding Fidelity Emerging Asia or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sp 500 Index  vs.  Fidelity Emerging Asia

Sp 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sp 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Emerging Asia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Asia are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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 Sp 500 and Fidelity Emerging

The main advantage of trading using opposite Sp 500 and Fidelity Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 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 Sp 500 Index 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.