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 Consumer and First Trust Nasdaq, 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
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and First Trust Nasdaq 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 Consumer 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 Consumer is expected to generate 0.69 times more return on investment than First Trust. However, Fidelity MSCI Consumer is 1.45 times less risky than First Trust. It trades about -0.08 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about -0.15 per unit of risk. If you would invest 4,971 in Fidelity MSCI Consumer on October 24, 2024 and sell it today you would lose (46.00) from holding Fidelity MSCI Consumer or give up 0.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity MSCI Consumer vs. First Trust Nasdaq
Performance |
| Timeline |
| Fidelity MSCI Consumer |
| 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 Utilities | Fidelity MSCI vs. Fidelity MSCI Industrials | Fidelity MSCI vs. Fidelity MSCI Materials | Fidelity MSCI vs. Fidelity MSCI Consumer |
| First Trust vs. First Trust Consumer | First Trust vs. Fidelity MSCI Consumer | First Trust vs. iShares Consumer Staples | First Trust vs. iShares Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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