Correlation Between Fidelity Emerging and Fidelity China

Can any of the company-specific risk be diversified away by investing in both Fidelity Emerging and Fidelity China 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 Fidelity China 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 Fidelity China Region, you can compare the effects of market volatilities on Fidelity Emerging and Fidelity China 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 Fidelity China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Emerging and Fidelity China.

Diversification Opportunities for Fidelity Emerging and Fidelity China

0.92

Correlation Coefficient

Fidelity Emerging  Fidelity China

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Emerging Markets and Fidelity China Region in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity China Region 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 Fidelity China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity China Region has no effect on the direction of Fidelity Emerging i.e., Fidelity Emerging and Fidelity China go up and down completely randomly.

Pair Corralation between Fidelity Emerging and Fidelity China

Assuming the 90 days horizon Fidelity Emerging Markets is expected to under-perform the Fidelity China. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Emerging Markets is 1.77 times less risky than Fidelity China. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Fidelity China Region is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,141  in Fidelity China Region on September 28, 2024 and sell it today you would lose (167.00) from holding Fidelity China Region or give up 4.03% of portfolio value over 90 days.

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

Fidelity Emerging Markets  vs.  Fidelity China Region

Fidelity Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity China Region

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fidelity Emerging and Fidelity China

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

The idea behind Fidelity Emerging Markets and Fidelity China Region 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.