Correlation Between Fidelity Canada and Fidelity Emerging

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

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

Diversification Opportunities for Fidelity Canada and Fidelity Emerging

0.67

Correlation Coefficient

Fidelity Canada  Fidelity Emerging

Poor diversification

The 3 months correlation between FIDELITY and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Canada 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 Fidelity Canada 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 Fidelity Canada 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 Fidelity Canada i.e., Fidelity Canada and Fidelity Emerging go up and down completely randomly.

Pair Corralation between Fidelity Canada and Fidelity Emerging

Assuming the 90 days horizon Fidelity Canada is expected to generate 2.14 times less return on investment than Fidelity Emerging. But when comparing it to its historical volatility, Fidelity Canada Fund is 1.96 times less risky than Fidelity Emerging. It trades about 0.16 of its potential returns per unit of risk. Fidelity Emerging Asia is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,393  in Fidelity Emerging Asia on September 5, 2024 and sell it today you would earn a total of  636.00  from holding Fidelity Emerging Asia or generate 14.48% return on investment over 90 days.

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

Fidelity Canada Fund  vs.  Fidelity Emerging Asia

Fidelity Canada

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canada Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Canada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Emerging Asia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Asia are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Canada and Fidelity Emerging

The main advantage of trading using opposite Fidelity Canada and Fidelity Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Canada 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 Fidelity Canada 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.