Correlation Between Fidelity Metaverse and First Trust

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

By analyzing existing cross correlation between Fidelity Metaverse ETF and First Trust Indxx, you can compare the effects of market volatilities on Fidelity Metaverse and First Trust 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 Metaverse with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Metaverse and First Trust.

Diversification Opportunities for Fidelity Metaverse and First Trust

0.76

Correlation Coefficient

Fidelity Metaverse  First Trust

Poor diversification

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

Pair Corralation between Fidelity Metaverse and First Trust

Given the investment horizon of 90 days Fidelity Metaverse ETF is expected to under-perform the First Trust. In addition to that, Fidelity Metaverse is 1.23 times more volatile than First Trust Indxx. It trades about -0.13 of its total potential returns per unit of risk. First Trust Indxx is currently generating about -0.14 per unit of volatility. If you would invest  3,986  in First Trust Indxx on October 10, 2024 and sell it today you would lose (121.00) from holding First Trust Indxx or give up 3.04% of portfolio value over 90 days.

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

Fidelity Metaverse ETF  vs.  First Trust Indxx

Fidelity Metaverse ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Metaverse ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Fidelity Metaverse is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Indxx

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fidelity Metaverse and First Trust

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

The idea behind Fidelity Metaverse ETF and First Trust Indxx 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.