Correlation Between Fidelity Emerging and IShares Treasury

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

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

Diversification Opportunities for Fidelity Emerging and IShares Treasury

-0.17

Correlation Coefficient

Fidelity Emerging  IShares Treasury

Good diversification

The 3 months correlation between Fidelity and IShares is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Emerging Markets and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond and Fidelity 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 Fidelity Emerging Markets are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of Fidelity Emerging i.e., Fidelity Emerging and IShares Treasury go up and down completely randomly.

Pair Corralation between Fidelity Emerging and IShares Treasury

Assuming the 90 days trading horizon Fidelity Emerging Markets is expected to generate 0.81 times more return on investment than IShares Treasury. However, Fidelity Emerging Markets is 1.23 times less risky than IShares Treasury. It trades about 0.08 of its potential returns per unit of risk. iShares Treasury Bond is currently generating about -0.17 per unit of risk. If you would invest  395.00  in Fidelity Emerging Markets on September 15, 2024 and sell it today you would earn a total of  14.00  from holding Fidelity Emerging Markets or generate 3.54% return on investment over 90 days.

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

Fidelity Emerging Markets  vs.  iShares Treasury Bond

Fidelity Emerging Markets

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Treasury Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Fidelity Emerging and IShares Treasury

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

The idea behind Fidelity Emerging Markets and iShares Treasury Bond 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.