Correlation Between WisdomTree Emerging and Fidelity Emerging

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

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

Diversification Opportunities for WisdomTree Emerging and Fidelity Emerging

0.77

Correlation Coefficient

WisdomTree Emerging  Fidelity Emerging

Poor diversification

The 3 months correlation between WisdomTree and Fidelity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Fidelity Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Markets and WisdomTree Emerging 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 WisdomTree Emerging Markets 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 Markets has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Fidelity Emerging go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Fidelity Emerging

Given the investment horizon of 90 days WisdomTree Emerging is expected to generate 1.23 times less return on investment than Fidelity Emerging. In addition to that, WisdomTree Emerging is 1.01 times more volatile than Fidelity Emerging Markets. It trades about 0.05 of its total potential returns per unit of risk. Fidelity Emerging Markets is currently generating about 0.06 per unit of volatility. If you would invest  2,521  in Fidelity Emerging Markets on December 28, 2024 and sell it today you would earn a total of  78.00  from holding Fidelity Emerging Markets or generate 3.09% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  Fidelity Emerging Markets

WisdomTree Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fidelity Emerging Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Markets are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Fidelity Emerging is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree Emerging and Fidelity Emerging

The main advantage of trading using opposite WisdomTree Emerging and Fidelity Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging 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 WisdomTree Emerging Markets and Fidelity Emerging Markets 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.