Correlation Between IShares Technology and Fidelity MSCI

Can any of the company-specific risk be diversified away by investing in both IShares Technology 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 Technology 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 Technology ETF and Fidelity MSCI Information, you can compare the effects of market volatilities on IShares Technology 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 Technology with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and Fidelity MSCI.

Diversification Opportunities for IShares Technology and Fidelity MSCI

1.0

Correlation Coefficient

IShares Technology  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 Technology ETF and Fidelity MSCI Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Information and IShares Technology 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 Technology ETF 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 Information has no effect on the direction of IShares Technology i.e., IShares Technology and Fidelity MSCI go up and down completely randomly.

Pair Corralation between IShares Technology and Fidelity MSCI

Considering the 90-day investment horizon iShares Technology ETF is expected to generate 0.99 times more return on investment than Fidelity MSCI. However, iShares Technology ETF is 1.01 times less risky than Fidelity MSCI. It trades about -0.12 of its potential returns per unit of risk. Fidelity MSCI Information is currently generating about -0.12 per unit of risk. If you would invest  16,092  in iShares Technology ETF on December 29, 2024 and sell it today you would lose (2,026) from holding iShares Technology ETF or give up 12.59% of portfolio value over 90 days.

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

iShares Technology ETF  vs.  Fidelity MSCI Information

iShares Technology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

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.

Pair Trading with IShares Technology and Fidelity MSCI

The main advantage of trading using opposite IShares Technology and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology 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 Technology ETF and Fidelity MSCI Information 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.