Correlation Between Fidelity MSCI and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and IShares Consumer 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 Consumer 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 iShares Consumer Staples, you can compare the effects of market volatilities on Fidelity MSCI and IShares Consumer 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 Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and IShares Consumer.
Diversification Opportunities for Fidelity MSCI and IShares Consumer
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples 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 IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares Consumer go up and down completely randomly.
Pair Corralation between Fidelity MSCI and IShares Consumer
Given the investment horizon of 90 days Fidelity MSCI Consumer is expected to generate 1.09 times more return on investment than IShares Consumer. However, Fidelity MSCI is 1.09 times more volatile than iShares Consumer Staples. It trades about 0.17 of its potential returns per unit of risk. iShares Consumer Staples is currently generating about 0.09 per unit of risk. If you would invest 5,030 in Fidelity MSCI Consumer on August 27, 2024 and sell it today you would earn a total of 118.00 from holding Fidelity MSCI Consumer or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity MSCI Consumer vs. iShares Consumer Staples
Performance |
| Timeline |
| Fidelity MSCI Consumer |
| iShares Consumer Staples |
Fidelity MSCI and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and IShares Consumer
The main advantage of trading using opposite Fidelity MSCI and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, IShares Consumer 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 Consumer will offset losses from the drop in IShares Consumer's long position.| Fidelity MSCI vs. Vanguard Consumer Discretionary | Fidelity MSCI vs. Vanguard Utilities Index | Fidelity MSCI vs. Vanguard Industrials Index | Fidelity MSCI vs. Vanguard Materials Index |
| IShares Consumer vs. Vanguard Consumer Discretionary | IShares Consumer vs. Vanguard Utilities Index | IShares Consumer vs. Vanguard Industrials Index | IShares Consumer vs. Vanguard Materials Index |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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