Correlation Between Fidelity MSCI and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and Invesco DWA 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 MSCI and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity MSCI Energy and Invesco DWA Energy, you can compare the effects of market volatilities on Fidelity MSCI and Invesco DWA 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 MSCI with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Invesco DWA.
Diversification Opportunities for Fidelity MSCI and Invesco DWA
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Energy and Invesco DWA Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Energy and Fidelity MSCI 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 MSCI Energy are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Energy has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Invesco DWA go up and down completely randomly.
Pair Corralation between Fidelity MSCI and Invesco DWA
Given the investment horizon of 90 days Fidelity MSCI is expected to generate 1.06 times less return on investment than Invesco DWA. But when comparing it to its historical volatility, Fidelity MSCI Energy is 1.16 times less risky than Invesco DWA. It trades about 1.0 of its potential returns per unit of risk. Invesco DWA Energy is currently generating about 0.91 of returns per unit of risk over similar time horizon. If you would invest 4,293 in Invesco DWA Energy on October 21, 2024 and sell it today you would earn a total of 587.00 from holding Invesco DWA Energy or generate 13.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity MSCI Energy vs. Invesco DWA Energy
Performance |
| Timeline |
| Fidelity MSCI Energy |
| Invesco DWA Energy |
Fidelity MSCI and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and Invesco DWA
The main advantage of trading using opposite Fidelity MSCI and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, Invesco DWA 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 Invesco DWA will offset losses from the drop in Invesco DWA's long position.| Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Utilities | Fidelity MSCI vs. Fidelity MSCI Health | Fidelity MSCI vs. Fidelity MSCI Consumer |
| Invesco DWA vs. Invesco Dynamic Energy | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco DWA Industrials | Invesco DWA vs. Invesco DWA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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