Correlation Between Cboe UK and Fidelity Sustainable

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

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

Diversification Opportunities for Cboe UK and Fidelity Sustainable

0.85

Correlation Coefficient

Cboe UK  Fidelity Sustainable

Very poor diversification

The 3 months correlation between Cboe and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Fidelity Sustainable USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Sustainable USD and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Fidelity Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Sustainable USD has no effect on the direction of Cboe UK i.e., Cboe UK and Fidelity Sustainable go up and down completely randomly.

Pair Corralation between Cboe UK and Fidelity Sustainable

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 2.94 times more return on investment than Fidelity Sustainable. However, Cboe UK is 2.94 times more volatile than Fidelity Sustainable USD. It trades about 0.3 of its potential returns per unit of risk. Fidelity Sustainable USD is currently generating about 0.21 per unit of risk. If you would invest  2,803,910  in Cboe UK Consumer on April 24, 2025 and sell it today you would earn a total of  491,223  from holding Cboe UK Consumer or generate 17.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

Cboe UK Consumer  vs.  Fidelity Sustainable USD

Pair Trading with Cboe UK and Fidelity Sustainable

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

The idea behind Cboe UK Consumer and Fidelity Sustainable USD 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..