Correlation Between Fidelity MSCI and IShares Global

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

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

Diversification Opportunities for Fidelity MSCI and IShares Global

0.19

Correlation Coefficient

Fidelity MSCI  IShares Global

Average diversification

The 3 months correlation between Fidelity and IShares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and iShares Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Consumer 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 Consumer are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Consumer has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares Global go up and down completely randomly.

Pair Corralation between Fidelity MSCI and IShares Global

Given the investment horizon of 90 days Fidelity MSCI is expected to generate 2.98 times less return on investment than IShares Global. In addition to that, Fidelity MSCI is 1.39 times more volatile than iShares Global Consumer. It trades about 0.03 of its total potential returns per unit of risk. iShares Global Consumer is currently generating about 0.12 per unit of volatility. If you would invest  6,139  in iShares Global Consumer on September 20, 2024 and sell it today you would earn a total of  68.00  from holding iShares Global Consumer or generate 1.11% return on investment over 90 days.

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

Fidelity MSCI Consumer  vs.  iShares Global Consumer

Fidelity MSCI Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity MSCI Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Global Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fidelity MSCI and IShares Global

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

The idea behind Fidelity MSCI Consumer and iShares Global Consumer 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.