Correlation Between Fidelity MSCI and Vanguard Financials
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and Vanguard Financials 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 Vanguard Financials 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 Vanguard Financials Index, you can compare the effects of market volatilities on Fidelity MSCI and Vanguard Financials 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 Vanguard Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Vanguard Financials.
Diversification Opportunities for Fidelity MSCI and Vanguard Financials
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Financials and Vanguard Financials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Financials Index 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 Vanguard Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Financials Index has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Vanguard Financials go up and down completely randomly.
Pair Corralation between Fidelity MSCI and Vanguard Financials
Given the investment horizon of 90 days Fidelity MSCI Financials is expected to generate 0.99 times more return on investment than Vanguard Financials. However, Fidelity MSCI Financials is 1.01 times less risky than Vanguard Financials. It trades about 0.27 of its potential returns per unit of risk. Vanguard Financials Index is currently generating about 0.26 per unit of risk. If you would invest 6,667 in Fidelity MSCI Financials on August 28, 2024 and sell it today you would earn a total of 644.00 from holding Fidelity MSCI Financials or generate 9.66% 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. Vanguard Financials Index
Performance |
| Timeline |
| Fidelity MSCI Financials |
| Vanguard Financials Index |
Fidelity MSCI and Vanguard Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and Vanguard Financials
The main advantage of trading using opposite Fidelity MSCI and Vanguard Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, Vanguard Financials 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 Vanguard Financials will offset losses from the drop in Vanguard Financials' 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 |
| Vanguard Financials vs. Vanguard Industrials Index | Vanguard Financials vs. Vanguard Consumer Discretionary | Vanguard Financials vs. Vanguard Materials Index | Vanguard Financials vs. Vanguard Health Care |
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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