Correlation Between Invesco SP and Fidelity MSCI

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

By analyzing existing cross correlation between Invesco SP 500 and Fidelity MSCI Financials, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Fidelity MSCI.

Diversification Opportunities for Invesco SP and Fidelity MSCI

0.02

Correlation Coefficient

Invesco SP  Fidelity MSCI

Significant diversification

The 3 months correlation between Invesco and Fidelity is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 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 Invesco SP 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 Invesco SP 500 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 Invesco SP i.e., Invesco SP and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Invesco SP and Fidelity MSCI

Considering the 90-day investment horizon Invesco SP 500 is expected to under-perform the Fidelity MSCI. In addition to that, Invesco SP is 2.65 times more volatile than Fidelity MSCI Financials. It trades about -0.02 of its total potential returns per unit of risk. Fidelity MSCI Financials is currently generating about 0.11 per unit of volatility. If you would invest  4,361  in Fidelity MSCI Financials on December 3, 2024 and sell it today you would earn a total of  2,975  from holding Fidelity MSCI Financials or generate 68.22% return on investment over 90 days.

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

Invesco SP 500  vs.  Fidelity MSCI Financials

Invesco SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP 500 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 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.

Fidelity MSCI Financials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 3 (%) 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 Invesco SP and Fidelity MSCI

The main advantage of trading using opposite Invesco SP and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP 500 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.