Correlation Between Fidelity MSCI and SPDR Kensho

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

Diversification Opportunities for Fidelity MSCI and SPDR Kensho

0.94

Correlation Coefficient

Fidelity MSCI  SPDR Kensho

Almost no diversification

The 3 months correlation between Fidelity and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Information and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future 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 SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and SPDR Kensho go up and down completely randomly.

Pair Corralation between Fidelity MSCI and SPDR Kensho

Given the investment horizon of 90 days Fidelity MSCI Information is expected to generate 1.2 times more return on investment than SPDR Kensho. However, Fidelity MSCI is 1.2 times more volatile than SPDR Kensho Future. It trades about 0.12 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about 0.1 per unit of risk. If you would invest  9,235  in Fidelity MSCI Information on September 14, 2024 and sell it today you would earn a total of  9,729  from holding Fidelity MSCI Information or generate 105.35% return on investment over 90 days.

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

Fidelity MSCI Information  vs.  SPDR Kensho Future

Fidelity MSCI Information

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Information are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Fidelity MSCI exhibited solid returns over the last few months and may actually be approaching a breakup point.

SPDR Kensho Future

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho Future are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, SPDR Kensho unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity MSCI and SPDR Kensho

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

The idea behind Fidelity MSCI Information and SPDR Kensho Future 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.