Correlation Between Fidelity Overseas and Fidelity Equity-income

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

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

Diversification Opportunities for Fidelity Overseas and Fidelity Equity-income

-0.35

Correlation Coefficient

Fidelity Overseas  Fidelity Equity-income

Very good diversification

The 3 months correlation between Fidelity and Fidelity is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Overseas Fund and Fidelity Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Income and Fidelity Overseas 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 Overseas Fund are associated (or correlated) with Fidelity Equity-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Income has no effect on the direction of Fidelity Overseas i.e., Fidelity Overseas and Fidelity Equity-income go up and down completely randomly.

Pair Corralation between Fidelity Overseas and Fidelity Equity-income

Assuming the 90 days horizon Fidelity Overseas is expected to generate 1.53 times less return on investment than Fidelity Equity-income. In addition to that, Fidelity Overseas is 1.38 times more volatile than Fidelity Equity Income Fund. It trades about 0.07 of its total potential returns per unit of risk. Fidelity Equity Income Fund is currently generating about 0.15 per unit of volatility. If you would invest  6,463  in Fidelity Equity Income Fund on September 4, 2024 and sell it today you would earn a total of  1,633  from holding Fidelity Equity Income Fund or generate 25.27% return on investment over 90 days.

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

Fidelity Overseas Fund  vs.  Fidelity Equity Income Fund

Fidelity Overseas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Equity Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Equity Income Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Equity-income 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 Overseas and Fidelity Equity-income

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

The idea behind Fidelity Overseas Fund and Fidelity Equity Income Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.