Correlation Between Fidelity MSCI and IShares Medical

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

Diversification Opportunities for Fidelity MSCI and IShares Medical

0.77

Correlation Coefficient

Fidelity MSCI  IShares Medical

Poor diversification

The 3 months correlation between Fidelity and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Health and iShares Medical Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Medical Devices 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 IShares Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Medical Devices has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares Medical go up and down completely randomly.

Pair Corralation between Fidelity MSCI and IShares Medical

Given the investment horizon of 90 days Fidelity MSCI Health is expected to generate 0.8 times more return on investment than IShares Medical. However, Fidelity MSCI Health is 1.25 times less risky than IShares Medical. It trades about 0.09 of its potential returns per unit of risk. iShares Medical Devices is currently generating about 0.03 per unit of risk. If you would invest  6,504  in Fidelity MSCI Health on December 29, 2024 and sell it today you would earn a total of  270.00  from holding Fidelity MSCI Health or generate 4.15% return on investment over 90 days.

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

Fidelity MSCI Health  vs.  iShares Medical Devices

Fidelity MSCI Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

iShares Medical Devices

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Medical Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, IShares Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fidelity MSCI and IShares Medical

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

The idea behind Fidelity MSCI Health and iShares Medical Devices 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.