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 Information and First Trust Cloud, 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
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Information and First Trust Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cloud 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 Information 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 Cloud 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 is expected to generate 1.15 times less return on investment than First Trust. But when comparing it to its historical volatility, Fidelity MSCI Information is 1.15 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust Cloud is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,919 in First Trust Cloud on August 27, 2024 and sell it today you would earn a total of 6,376 from holding First Trust Cloud or generate 107.72% 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 Information vs. First Trust Cloud
Performance |
| Timeline |
| Fidelity MSCI Information |
| First Trust Cloud |
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 Health | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Energy |
| First Trust vs. Invesco DWA Utilities | First Trust vs. Invesco Dynamic Large | First Trust vs. Invesco Dynamic Large | First Trust vs. HUMANA INC |
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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