Correlation Between Fidelity MSCI and ProShares Online

Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and ProShares Online 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 ProShares Online 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 ProShares Online Retail, you can compare the effects of market volatilities on Fidelity MSCI and ProShares Online 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 ProShares Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and ProShares Online.

Diversification Opportunities for Fidelity MSCI and ProShares Online

0.69

Correlation Coefficient

Fidelity MSCI  ProShares Online

Poor diversification

The 3 months correlation between Fidelity and ProShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and ProShares Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Online Retail 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 ProShares Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Online Retail has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and ProShares Online go up and down completely randomly.

Pair Corralation between Fidelity MSCI and ProShares Online

Given the investment horizon of 90 days Fidelity MSCI Consumer is expected to generate 0.82 times more return on investment than ProShares Online. However, Fidelity MSCI Consumer is 1.21 times less risky than ProShares Online. It trades about 0.29 of its potential returns per unit of risk. ProShares Online Retail is currently generating about 0.18 per unit of risk. If you would invest  8,499  in Fidelity MSCI Consumer on September 14, 2024 and sell it today you would earn a total of  1,751  from holding Fidelity MSCI Consumer or generate 20.6% return on investment over 90 days.

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

Fidelity MSCI Consumer  vs.  ProShares Online Retail

Fidelity MSCI Consumer

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 22 (%) 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.

ProShares Online Retail

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, ProShares Online displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity MSCI and ProShares Online

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

The idea behind Fidelity MSCI Consumer and ProShares Online Retail 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.