Correlation Between Fidelity MSCI and Invesco Dynamic

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

Diversification Opportunities for Fidelity MSCI and Invesco Dynamic

0.51

Correlation Coefficient

Fidelity MSCI  Invesco Dynamic

Very weak diversification

The 3 months correlation between Fidelity and Invesco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Energy and Invesco Dynamic Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Oil 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 Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Oil has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Invesco Dynamic go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Invesco Dynamic

Given the investment horizon of 90 days Fidelity MSCI Energy is expected to generate 0.66 times more return on investment than Invesco Dynamic. However, Fidelity MSCI Energy is 1.53 times less risky than Invesco Dynamic. It trades about 0.05 of its potential returns per unit of risk. Invesco Dynamic Oil is currently generating about -0.02 per unit of risk. If you would invest  2,394  in Fidelity MSCI Energy on September 18, 2024 and sell it today you would earn a total of  80.00  from holding Fidelity MSCI Energy or generate 3.34% return on investment over 90 days.

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

Fidelity MSCI Energy  vs.  Invesco Dynamic Oil

Fidelity MSCI Energy

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco Dynamic Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Dynamic Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco Dynamic is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Fidelity MSCI and Invesco Dynamic

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

The idea behind Fidelity MSCI Energy and Invesco Dynamic Oil 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.