Correlation Between Fidelity MSCI and IShares Expanded

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

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

Diversification Opportunities for Fidelity MSCI and IShares Expanded

0.93

Correlation Coefficient

Fidelity MSCI  IShares Expanded

Almost no diversification

The 3 months correlation between Fidelity and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Information and iShares Expanded Tech Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech 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 Information are associated (or correlated) with IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares Expanded go up and down completely randomly.

Pair Corralation between Fidelity MSCI and IShares Expanded

Given the investment horizon of 90 days Fidelity MSCI Information is expected to under-perform the IShares Expanded. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity MSCI Information is 1.01 times less risky than IShares Expanded. The etf trades about -0.12 of its potential returns per unit of risk. The iShares Expanded Tech Software is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  10,094  in iShares Expanded Tech Software on December 29, 2024 and sell it today you would lose (1,107) from holding iShares Expanded Tech Software or give up 10.97% 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 Information  vs.  iShares Expanded Tech Software

Fidelity MSCI Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity MSCI Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

iShares Expanded Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Expanded Tech Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Fidelity MSCI and IShares Expanded

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

The idea behind Fidelity MSCI Information and iShares Expanded Tech 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.