Correlation Between Fidelity MSCI and Virtus Reaves

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

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

Diversification Opportunities for Fidelity MSCI and Virtus Reaves

0.67

Correlation Coefficient

Fidelity MSCI  Virtus Reaves

Poor diversification

The 3 months correlation between Fidelity and Virtus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Utilities and Virtus Reaves Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Reaves Utilities 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 Utilities are associated (or correlated) with Virtus Reaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Reaves Utilities has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Virtus Reaves go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Virtus Reaves

Given the investment horizon of 90 days Fidelity MSCI Utilities is expected to under-perform the Virtus Reaves. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity MSCI Utilities is 1.9 times less risky than Virtus Reaves. The etf trades about -0.01 of its potential returns per unit of risk. The Virtus Reaves Utilities is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,751  in Virtus Reaves Utilities on November 19, 2024 and sell it today you would earn a total of  270.00  from holding Virtus Reaves Utilities or generate 4.0% return on investment over 90 days.

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

Fidelity MSCI Utilities  vs.  Virtus Reaves Utilities

Fidelity MSCI Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity MSCI Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly 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.

Virtus Reaves Utilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Reaves Utilities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Virtus Reaves is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity MSCI and Virtus Reaves

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

The idea behind Fidelity MSCI Utilities and Virtus Reaves Utilities 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.