Correlation Between IShares Financial and Fidelity MSCI

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

By analyzing existing cross correlation between iShares Financial Services and Fidelity MSCI Financials, you can compare the effects of market volatilities on IShares Financial and Fidelity MSCI 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 IShares Financial with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financial and Fidelity MSCI.

Diversification Opportunities for IShares Financial and Fidelity MSCI

1.0

Correlation Coefficient

IShares Financial  Fidelity MSCI

No risk reduction

The 3 months correlation between IShares and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financial Services and Fidelity MSCI Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Financials and IShares Financial 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 iShares Financial Services are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Financials has no effect on the direction of IShares Financial i.e., IShares Financial and Fidelity MSCI go up and down completely randomly.

Pair Corralation between IShares Financial and Fidelity MSCI

Considering the 90-day investment horizon IShares Financial is expected to generate 1.48 times less return on investment than Fidelity MSCI. In addition to that, IShares Financial is 1.09 times more volatile than Fidelity MSCI Financials. It trades about 0.01 of its total potential returns per unit of risk. Fidelity MSCI Financials is currently generating about 0.01 per unit of volatility. If you would invest  6,834  in Fidelity MSCI Financials on December 29, 2024 and sell it today you would earn a total of  38.00  from holding Fidelity MSCI Financials or generate 0.56% return on investment over 90 days.

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

iShares Financial Services  vs.  Fidelity MSCI Financials

iShares Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity MSCI Financials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Financial and Fidelity MSCI

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

The idea behind iShares Financial Services and Fidelity MSCI Financials 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.