Correlation Between IShares Core and Fidelity Real

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

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

Diversification Opportunities for IShares Core and Fidelity Real

0.68

Correlation Coefficient

IShares Core  Fidelity Real

Poor diversification

The 3 months correlation between IShares and Fidelity is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core REIT and Fidelity Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Real Estate and IShares Core 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 Core REIT are associated (or correlated) with Fidelity Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Real Estate has no effect on the direction of IShares Core i.e., IShares Core and Fidelity Real go up and down completely randomly.

Pair Corralation between IShares Core and Fidelity Real

Given the investment horizon of 90 days IShares Core is expected to generate 1.38 times less return on investment than Fidelity Real. But when comparing it to its historical volatility, iShares Core REIT is 1.11 times less risky than Fidelity Real. It trades about 0.01 of its potential returns per unit of risk. Fidelity Real Estate is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,326  in Fidelity Real Estate on September 15, 2024 and sell it today you would earn a total of  5.00  from holding Fidelity Real Estate or generate 0.21% return on investment over 90 days.

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

iShares Core REIT  vs.  Fidelity Real Estate

iShares Core REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fidelity Real is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Fidelity Real

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

The idea behind iShares Core REIT and Fidelity Real Estate 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.