Correlation Between Fidelity Covington and Global X

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

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

Diversification Opportunities for Fidelity Covington and Global X

-0.21

Correlation Coefficient

Fidelity Covington  Global X

Very good diversification

The 3 months correlation between Fidelity and Global is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and Fidelity Covington 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 Covington Trust are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and Global X go up and down completely randomly.

Pair Corralation between Fidelity Covington and Global X

Given the investment horizon of 90 days Fidelity Covington Trust is expected to generate 0.71 times more return on investment than Global X. However, Fidelity Covington Trust is 1.4 times less risky than Global X. It trades about 0.15 of its potential returns per unit of risk. Global X Funds is currently generating about 0.05 per unit of risk. If you would invest  2,993  in Fidelity Covington Trust on September 12, 2024 and sell it today you would earn a total of  193.00  from holding Fidelity Covington Trust or generate 6.45% return on investment over 90 days.

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

Fidelity Covington Trust  vs.  Global X Funds

Fidelity Covington Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global X Funds

Risk-Adjusted Performance

3 of 100

Weak

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

Pair Trading with Fidelity Covington and Global X

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

The idea behind Fidelity Covington Trust and Global X Funds 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.