Correlation Between Fidelity Quality and Fidelity Europe

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

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

Diversification Opportunities for Fidelity Quality and Fidelity Europe

-0.35

Correlation Coefficient

Fidelity Quality  Fidelity Europe

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 Quality Income and Fidelity Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe Quality and Fidelity Quality 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 Quality Income are associated (or correlated) with Fidelity Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe Quality has no effect on the direction of Fidelity Quality i.e., Fidelity Quality and Fidelity Europe go up and down completely randomly.

Pair Corralation between Fidelity Quality and Fidelity Europe

Assuming the 90 days trading horizon Fidelity Quality Income is expected to generate 0.88 times more return on investment than Fidelity Europe. However, Fidelity Quality Income is 1.14 times less risky than Fidelity Europe. It trades about 0.19 of its potential returns per unit of risk. Fidelity Europe Quality is currently generating about 0.01 per unit of risk. If you would invest  95,888  in Fidelity Quality Income on September 16, 2024 and sell it today you would earn a total of  8,162  from holding Fidelity Quality Income or generate 8.51% return on investment over 90 days.

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

Fidelity Quality Income  vs.  Fidelity Europe Quality

Fidelity Quality Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Quality Income are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fidelity Quality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Europe Quality

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Europe Quality are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity Europe is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity Quality and Fidelity Europe

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

The idea behind Fidelity Quality Income and Fidelity Europe Quality 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.