Correlation Between Fidelity MSCI and VanEck Biotech

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

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

Diversification Opportunities for Fidelity MSCI and VanEck Biotech

0.97

Correlation Coefficient

Fidelity MSCI  VanEck Biotech

Almost no diversification

The 3 months correlation between Fidelity and VanEck is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Health and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF 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 Health are associated (or correlated) with VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and VanEck Biotech go up and down completely randomly.

Pair Corralation between Fidelity MSCI and VanEck Biotech

Given the investment horizon of 90 days Fidelity MSCI Health is expected to generate 0.68 times more return on investment than VanEck Biotech. However, Fidelity MSCI Health is 1.47 times less risky than VanEck Biotech. It trades about -0.1 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about -0.09 per unit of risk. If you would invest  7,370  in Fidelity MSCI Health on September 3, 2024 and sell it today you would lose (350.00) from holding Fidelity MSCI Health or give up 4.75% of portfolio value over 90 days.

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

Fidelity MSCI Health  vs.  VanEck Biotech ETF

Fidelity MSCI Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity MSCI Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Biotech ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Biotech ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, VanEck Biotech is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fidelity MSCI and VanEck Biotech

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

The idea behind Fidelity MSCI Health and VanEck Biotech ETF 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.