Correlation Between NATO and Fidelity MSCI

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

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

Diversification Opportunities for NATO and Fidelity MSCI

0.46

Correlation Coefficient

NATO  Fidelity MSCI

Very weak diversification

The 3 months correlation between NATO and Fidelity is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NATO and Fidelity MSCI Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Industrials and NATO 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 NATO 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 Industrials has no effect on the direction of NATO i.e., NATO and Fidelity MSCI go up and down completely randomly.

Pair Corralation between NATO and Fidelity MSCI

Given the investment horizon of 90 days NATO is expected to generate 1.52 times less return on investment than Fidelity MSCI. In addition to that, NATO is 1.35 times more volatile than Fidelity MSCI Industrials. It trades about 0.06 of its total potential returns per unit of risk. Fidelity MSCI Industrials is currently generating about 0.13 per unit of volatility. If you would invest  6,937  in Fidelity MSCI Industrials on September 13, 2024 and sell it today you would earn a total of  523.00  from holding Fidelity MSCI Industrials or generate 7.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	68.25%
Values	Daily Returns

NATO  vs.  Fidelity MSCI Industrials

NATO

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NATO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NATO is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity MSCI Industrials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Industrials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NATO and Fidelity MSCI

The main advantage of trading using opposite NATO and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NATO 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 NATO and Fidelity MSCI Industrials 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.

Check out your portfolio center.

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.