Correlation Between Utilities Select and Fidelity MSCI

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

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

Diversification Opportunities for Utilities Select and Fidelity MSCI

1.0

Correlation Coefficient

Utilities Select  Fidelity MSCI

No risk reduction

The 3 months correlation between Utilities and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Select Sector and Fidelity MSCI Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Utilities and Utilities Select 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 Utilities Select Sector 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 Utilities has no effect on the direction of Utilities Select i.e., Utilities Select and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Utilities Select and Fidelity MSCI

Considering the 90-day investment horizon Utilities Select Sector is expected to generate 1.02 times more return on investment than Fidelity MSCI. However, Utilities Select is 1.02 times more volatile than Fidelity MSCI Utilities. It trades about 0.23 of its potential returns per unit of risk. Fidelity MSCI Utilities is currently generating about 0.23 per unit of risk. If you would invest  7,580  in Utilities Select Sector on October 21, 2024 and sell it today you would earn a total of  304.00  from holding Utilities Select Sector or generate 4.01% return on investment over 90 days.

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

Utilities Select Sector  vs.  Fidelity MSCI Utilities

Utilities Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity MSCI Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity MSCI Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Utilities Select and Fidelity MSCI

The main advantage of trading using opposite Utilities Select and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Select 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 Utilities Select Sector and Fidelity MSCI Utilities 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.