Correlation Between Global X and Fidelity Covington

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

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

Diversification Opportunities for Global X and Fidelity Covington

0.87

Correlation Coefficient

Global X  Fidelity Covington

Very poor diversification

The 3 months correlation between Global and Fidelity is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global X Cybersecurity and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and Global X 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 Global X Cybersecurity are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Global X i.e., Global X and Fidelity Covington go up and down completely randomly.

Pair Corralation between Global X and Fidelity Covington

Considering the 90-day investment horizon Global X Cybersecurity is expected to under-perform the Fidelity Covington. But the etf apears to be less risky and, when comparing its historical volatility, Global X Cybersecurity is 1.05 times less risky than Fidelity Covington. The etf trades about -0.03 of its potential returns per unit of risk. The Fidelity Covington Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,442  in Fidelity Covington Trust on February 20, 2024 and sell it today you would earn a total of  7.00  from holding Fidelity Covington Trust or generate 0.49% return on investment over 90 days.

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

Global X Cybersecurity  vs.  Fidelity Covington Trust

Global X Cybersecurity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Cybersecurity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Global X and Fidelity Covington

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

The idea behind Global X Cybersecurity and Fidelity Covington Trust 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.