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 Financials, 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
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fidelity and Fidelity is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust 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 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 Financials 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 1.84 times less return on investment than Fidelity MSCI. But when comparing it to its historical volatility, Fidelity Covington Trust is 1.05 times less risky than Fidelity MSCI. It trades about 0.11 of its potential returns per unit of risk. Fidelity MSCI Financials is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,775 in Fidelity MSCI Financials on September 1, 2024 and sell it today you would earn a total of 1,556 from holding Fidelity MSCI Financials or generate 26.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Covington Trust vs. Fidelity MSCI Financials
Performance |
| Timeline |
| Fidelity Covington Trust |
| Fidelity MSCI Financials |
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 MSCI Financials | Fidelity Covington vs. Fidelity MSCI Consumer | Fidelity Covington vs. Fidelity MSCI Consumer | Fidelity Covington vs. Fidelity MSCI Industrials |
| Fidelity MSCI vs. Fidelity MSCI Industrials | Fidelity MSCI vs. Fidelity MSCI Health | Fidelity MSCI vs. Fidelity MSCI Materials | 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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