Correlation Between Fidelity MSCI and Invesco KBW
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and Invesco KBW 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 KBW 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 Invesco KBW Regional, you can compare the effects of market volatilities on Fidelity MSCI and Invesco KBW 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 KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Invesco KBW.
Diversification Opportunities for Fidelity MSCI and Invesco KBW
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Financials and Invesco KBW Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Regional 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 Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Regional has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Invesco KBW go up and down completely randomly.
Pair Corralation between Fidelity MSCI and Invesco KBW
Given the investment horizon of 90 days Fidelity MSCI Financials is expected to generate 0.51 times more return on investment than Invesco KBW. However, Fidelity MSCI Financials is 1.97 times less risky than Invesco KBW. It trades about 0.08 of its potential returns per unit of risk. Invesco KBW Regional is currently generating about 0.03 per unit of risk. If you would invest 4,899 in Fidelity MSCI Financials on October 21, 2024 and sell it today you would earn a total of 2,251 from holding Fidelity MSCI Financials or generate 45.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity MSCI Financials vs. Invesco KBW Regional
Performance |
| Timeline |
| Fidelity MSCI Financials |
| Invesco KBW Regional |
Fidelity MSCI and Invesco KBW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and Invesco KBW
The main advantage of trading using opposite Fidelity MSCI and Invesco KBW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, Invesco KBW 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 KBW will offset losses from the drop in Invesco KBW'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 |
| Invesco KBW vs. First Trust NASDAQ | Invesco KBW vs. Invesco KBW Bank | Invesco KBW vs. Invesco KBW Property | Invesco KBW vs. Invesco SP SmallCap |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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