Correlation Between Fidelity MSCI and First Trust
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity MSCI Health and First Trust NASDAQ 100 Technology, you can compare the effects of market volatilities on Fidelity MSCI and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and First Trust.
Diversification Opportunities for Fidelity MSCI and First Trust
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fidelity and First is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Health and First Trust NASDAQ 100 Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 Health are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and First Trust go up and down completely randomly.
Pair Corralation between Fidelity MSCI and First Trust
Given the investment horizon of 90 days Fidelity MSCI is expected to generate 5.29 times less return on investment than First Trust. But when comparing it to its historical volatility, Fidelity MSCI Health is 2.1 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust NASDAQ 100 Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,071 in First Trust NASDAQ 100 Technology on August 30, 2024 and sell it today you would earn a total of 8,415 from holding First Trust NASDAQ 100 Technology or generate 76.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity MSCI Health vs. First Trust NASDAQ 100 Technol
Performance |
| Timeline |
| Fidelity MSCI Health |
| First Trust NASDAQ |
Fidelity MSCI and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and First Trust
The main advantage of trading using opposite Fidelity MSCI and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Industrials |
| First Trust vs. First Trust Technology | First Trust vs. First Trust NASDAQ 100 | First Trust vs. Invesco NASDAQ Internet | First Trust vs. First Trust Dow |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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