Correlation Between Fidelity Covington and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both Fidelity Covington 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 Fidelity Covington and Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Covington Trust and Fidelity MSCI Industrials, you can compare the effects of market volatilities on Fidelity Covington 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 Fidelity Covington with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Covington and Fidelity MSCI.
Diversification Opportunities for Fidelity Covington and Fidelity MSCI
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust 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 Fidelity Covington 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 Fidelity Covington Trust 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 Fidelity Covington i.e., Fidelity Covington and Fidelity MSCI go up and down completely randomly.
Pair Corralation between Fidelity Covington and Fidelity MSCI
Given the investment horizon of 90 days Fidelity Covington is expected to generate 4.73 times less return on investment than Fidelity MSCI. In addition to that, Fidelity Covington is 1.22 times more volatile than Fidelity MSCI Industrials. It trades about 0.02 of its total potential returns per unit of risk. Fidelity MSCI Industrials is currently generating about 0.09 per unit of volatility. If you would invest 5,099 in Fidelity MSCI Industrials on September 3, 2024 and sell it today you would earn a total of 2,640 from holding Fidelity MSCI Industrials or generate 51.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Covington Trust vs. Fidelity MSCI Industrials
Performance |
| Timeline |
| Fidelity Covington Trust |
| Fidelity MSCI Industrials |
Fidelity Covington and Fidelity MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Covington and Fidelity MSCI
The main advantage of trading using opposite Fidelity Covington and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington 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.| Fidelity Covington vs. Fidelity Covington Trust | Fidelity Covington vs. Fidelity Covington Trust | Fidelity Covington vs. Fidelity Covington Trust |
| Fidelity MSCI vs. Fidelity MSCI Materials | Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Consumer |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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