Correlation Between IShares MSCI and Fidelity International

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

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

Diversification Opportunities for IShares MSCI and Fidelity International

0.95

Correlation Coefficient

IShares MSCI  Fidelity International

Almost no diversification

The 3 months correlation between IShares and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Fidelity International Multifa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and IShares MSCI 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 iShares MSCI EAFE are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of IShares MSCI i.e., IShares MSCI and Fidelity International go up and down completely randomly.

Pair Corralation between IShares MSCI and Fidelity International

Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.13 times more return on investment than Fidelity International. However, IShares MSCI is 1.13 times more volatile than Fidelity International Multifactor. It trades about 0.05 of its potential returns per unit of risk. Fidelity International Multifactor is currently generating about 0.05 per unit of risk. If you would invest  6,648  in iShares MSCI EAFE on October 27, 2024 and sell it today you would earn a total of  1,275  from holding iShares MSCI EAFE or generate 19.18% return on investment over 90 days.

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

iShares MSCI EAFE  vs.  Fidelity International Multifa

iShares MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fidelity International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares MSCI and Fidelity International

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

The idea behind iShares MSCI EAFE and Fidelity International Multifactor 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.