Correlation Between Select STOXX and Fidelity MSCI

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

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

Diversification Opportunities for Select STOXX and Fidelity MSCI

-0.33

Correlation Coefficient

Select STOXX  Fidelity MSCI

Very good diversification

The 3 months correlation between Select and Fidelity is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Select STOXX Europe and Fidelity MSCI Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Industrials and Select STOXX 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 Select STOXX Europe 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 Industrials has no effect on the direction of Select STOXX i.e., Select STOXX and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Select STOXX and Fidelity MSCI

Given the investment horizon of 90 days Select STOXX is expected to generate 3.17 times less return on investment than Fidelity MSCI. In addition to that, Select STOXX is 1.29 times more volatile than Fidelity MSCI Industrials. It trades about 0.05 of its total potential returns per unit of risk. Fidelity MSCI Industrials is currently generating about 0.22 per unit of volatility. If you would invest  6,741  in Fidelity MSCI Industrials on September 5, 2024 and sell it today you would earn a total of  889.00  from holding Fidelity MSCI Industrials or generate 13.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.44%
Values	Daily Returns

Select STOXX Europe  vs.  Fidelity MSCI Industrials

Select STOXX Europe

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select STOXX Europe are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Select STOXX is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fidelity MSCI Industrials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Industrials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Select STOXX and Fidelity MSCI

The main advantage of trading using opposite Select STOXX and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select STOXX 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 Select STOXX Europe and Fidelity MSCI Industrials 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 Commodity Directory module to find actively traded commodities issued by global exchanges.