Correlation Between Fidelity MSCI and Fidelity MSCI

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

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

Diversification Opportunities for Fidelity MSCI and Fidelity MSCI

0.9

Correlation Coefficient

Fidelity MSCI  Fidelity MSCI

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and Fidelity MSCI Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Financials and Fidelity 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 Fidelity MSCI Consumer 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 Financials has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Fidelity MSCI

Given the investment horizon of 90 days Fidelity MSCI Consumer is expected to generate 0.89 times more return on investment than Fidelity MSCI. However, Fidelity MSCI Consumer is 1.12 times less risky than Fidelity MSCI. It trades about 0.3 of its potential returns per unit of risk. Fidelity MSCI Financials is currently generating about 0.19 per unit of risk. If you would invest  8,510  in Fidelity MSCI Consumer on September 13, 2024 and sell it today you would earn a total of  1,801  from holding Fidelity MSCI Consumer or generate 21.16% return on investment over 90 days.

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

Fidelity MSCI Consumer  vs.  Fidelity MSCI Financials

Fidelity MSCI Consumer

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 23 (%) 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.

Fidelity MSCI Financials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Fidelity MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity MSCI and Fidelity MSCI

The main advantage of trading using opposite Fidelity MSCI and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI 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 Fidelity MSCI Consumer and Fidelity MSCI Financials 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.