Correlation Between Fidelity MSCI and IShares Financial
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and IShares Financial 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 IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity MSCI Financials and iShares Financial Services, you can compare the effects of market volatilities on Fidelity MSCI and IShares Financial 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 IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and IShares Financial.
Diversification Opportunities for Fidelity MSCI and IShares Financial
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Financials and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial 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 Financials are associated (or correlated) with IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares Financial go up and down completely randomly.
Pair Corralation between Fidelity MSCI and IShares Financial
Given the investment horizon of 90 days Fidelity MSCI is expected to generate 1.0 times less return on investment than IShares Financial. But when comparing it to its historical volatility, Fidelity MSCI Financials is 1.06 times less risky than IShares Financial. It trades about 0.15 of its potential returns per unit of risk. iShares Financial Services is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,981 in iShares Financial Services on August 27, 2024 and sell it today you would earn a total of 3,165 from holding iShares Financial Services or generate 63.54% 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 Financials vs. iShares Financial Services
Performance |
| Timeline |
| Fidelity MSCI Financials |
| iShares Financial |
Fidelity MSCI and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and IShares Financial
The main advantage of trading using opposite Fidelity MSCI and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, IShares Financial 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 IShares Financial will offset losses from the drop in IShares Financial's long position.| Fidelity MSCI vs. Fidelity MSCI Industrials | Fidelity MSCI vs. Fidelity MSCI Health | Fidelity MSCI vs. Fidelity MSCI Materials | Fidelity MSCI vs. Fidelity MSCI Consumer |
| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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