Correlation Between Fidelity MSCI and Defiance Next

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

By analyzing existing cross correlation between Fidelity MSCI Energy and Defiance Next Gen, you can compare the effects of market volatilities on Fidelity MSCI and Defiance Next 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 Defiance Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Defiance Next.

Diversification Opportunities for Fidelity MSCI and Defiance Next

-0.08

Correlation Coefficient

Fidelity MSCI  Defiance Next

Good diversification

The 3 months correlation between Fidelity and Defiance is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Energy and Defiance Next Gen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Next Gen 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 Energy are associated (or correlated) with Defiance Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Next Gen has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Defiance Next go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Defiance Next

Given the investment horizon of 90 days Fidelity MSCI Energy is expected to generate 0.56 times more return on investment than Defiance Next. However, Fidelity MSCI Energy is 1.78 times less risky than Defiance Next. It trades about 0.11 of its potential returns per unit of risk. Defiance Next Gen is currently generating about -0.15 per unit of risk. If you would invest  2,339  in Fidelity MSCI Energy on December 30, 2024 and sell it today you would earn a total of  189.00  from holding Fidelity MSCI Energy or generate 8.08% return on investment over 90 days.

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

Fidelity MSCI Energy  vs.  Defiance Next Gen

Fidelity MSCI Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Defiance Next Gen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defiance Next Gen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Fidelity MSCI and Defiance Next

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

The idea behind Fidelity MSCI Energy and Defiance Next Gen 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.