Correlation Between Fidelity MSCI and SPDR SP

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

Diversification Opportunities for Fidelity MSCI and SPDR SP

-0.76

Correlation Coefficient

Fidelity MSCI  SPDR SP

Pay attention - limited upside

The 3 months correlation between Fidelity and SPDR is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Health and SPDR SP Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Software 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Software has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and SPDR SP go up and down completely randomly.

Pair Corralation between Fidelity MSCI and SPDR SP

Given the investment horizon of 90 days Fidelity MSCI is expected to generate 8.41 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Fidelity MSCI Health is 2.0 times less risky than SPDR SP. It trades about 0.02 of its potential returns per unit of risk. SPDR SP Software is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,739  in SPDR SP Software on September 27, 2024 and sell it today you would earn a total of  8,661  from holding SPDR SP Software or generate 80.65% return on investment over 90 days.

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

Fidelity MSCI Health  vs.  SPDR SP Software

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 latest abnormal performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

SPDR SP Software

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Software are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, SPDR SP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity MSCI and SPDR SP

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

The idea behind Fidelity MSCI Health and SPDR SP Software 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.