Correlation Between First Trust and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both First Trust and Fidelity MSCI 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 First Trust and Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ 100 Technology and Fidelity MSCI Financials, you can compare the effects of market volatilities on First Trust and Fidelity MSCI 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 First Trust with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Fidelity MSCI.
Diversification Opportunities for First Trust and Fidelity MSCI
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ 100 Technol and Fidelity MSCI Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Financials and First Trust 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 First Trust NASDAQ 100 Technology are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Financials has no effect on the direction of First Trust i.e., First Trust and Fidelity MSCI go up and down completely randomly.
Pair Corralation between First Trust and Fidelity MSCI
Given the investment horizon of 90 days First Trust is expected to generate 3.36 times less return on investment than Fidelity MSCI. But when comparing it to its historical volatility, First Trust NASDAQ 100 Technology is 1.03 times less risky than Fidelity MSCI. It trades about 0.08 of its potential returns per unit of risk. Fidelity MSCI Financials is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 6,588 in Fidelity MSCI Financials on August 26, 2024 and sell it today you would earn a total of 659.00 from holding Fidelity MSCI Financials or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ 100 Technol vs. Fidelity MSCI Financials
Performance |
| Timeline |
| First Trust NASDAQ |
| Fidelity MSCI Financials |
First Trust and Fidelity MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Fidelity MSCI
The main advantage of trading using opposite First Trust and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Fidelity MSCI 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 Fidelity MSCI will offset losses from the drop in Fidelity MSCI's long position.| First Trust vs. Invesco DWA Utilities | First Trust vs. Invesco Dynamic Large | First Trust vs. Invesco Dynamic Large | First Trust vs. HUMANA INC |
| Fidelity MSCI vs. UBS AG London | Fidelity MSCI vs. UBS AG London | Fidelity MSCI vs. ETRACS Quarterly Pay | Fidelity MSCI vs. ETRACS 2xMonthly Pay |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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