Correlation Between Fidelity MSCI and Invesco PHLX

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

Diversification Opportunities for Fidelity MSCI and Invesco PHLX

-0.08

Correlation Coefficient

Fidelity MSCI  Invesco PHLX

Good diversification

The 3 months correlation between Fidelity and Invesco is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Information and Invesco PHLX Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco PHLX Semicon 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 Invesco PHLX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco PHLX Semicon has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Invesco PHLX go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Invesco PHLX

Given the investment horizon of 90 days Fidelity MSCI Information is expected to under-perform the Invesco PHLX. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity MSCI Information is 1.53 times less risky than Invesco PHLX. The etf trades about -0.01 of its potential returns per unit of risk. The Invesco PHLX Semiconductor is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,849  in Invesco PHLX Semiconductor on October 11, 2024 and sell it today you would earn a total of  219.00  from holding Invesco PHLX Semiconductor or generate 5.69% return on investment over 90 days.

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

Fidelity MSCI Information  vs.  Invesco PHLX Semiconductor

Fidelity MSCI Information

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Information are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco PHLX Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco PHLX Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco PHLX is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fidelity MSCI and Invesco PHLX

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

The idea behind Fidelity MSCI Information and Invesco PHLX Semiconductor 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.