Correlation Between Columbia Emerging and Fidelity MSCI

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

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

Diversification Opportunities for Columbia Emerging and Fidelity MSCI

-0.76

Correlation Coefficient

Columbia Emerging  Fidelity MSCI

Pay attention - limited upside

The 3 months correlation between Columbia and Fidelity is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Emerging Markets and Fidelity MSCI Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Consumer and Columbia 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 Columbia Emerging Markets are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Consumer has no effect on the direction of Columbia Emerging i.e., Columbia Emerging and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Columbia Emerging and Fidelity MSCI

Given the investment horizon of 90 days Columbia Emerging is expected to generate 10.78 times less return on investment than Fidelity MSCI. But when comparing it to its historical volatility, Columbia Emerging Markets is 1.25 times less risky than Fidelity MSCI. It trades about 0.01 of its potential returns per unit of risk. Fidelity MSCI Consumer is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,589  in Fidelity MSCI Consumer on September 26, 2024 and sell it today you would earn a total of  4,599  from holding Fidelity MSCI Consumer or generate 82.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Columbia Emerging Markets  vs.  Fidelity MSCI Consumer

Columbia Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Fidelity MSCI Consumer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Fidelity MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Columbia Emerging and Fidelity MSCI

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

The idea behind Columbia Emerging Markets and Fidelity MSCI Consumer 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.