Correlation Between Health Care and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Select and Fidelity MSCI Health, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Fidelity MSCI.
Diversification Opportunities for Health Care and Fidelity MSCI
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Health and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and Fidelity MSCI Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Health and Health Care 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 Health Care Select 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 Health has no effect on the direction of Health Care i.e., Health Care and Fidelity MSCI go up and down completely randomly.
Pair Corralation between Health Care and Fidelity MSCI
Considering the 90-day investment horizon Health Care is expected to generate 1.39 times less return on investment than Fidelity MSCI. But when comparing it to its historical volatility, Health Care Select is 1.05 times less risky than Fidelity MSCI. It trades about 0.03 of its potential returns per unit of risk. Fidelity MSCI Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,763 in Fidelity MSCI Health on September 1, 2024 and sell it today you would earn a total of 257.00 from holding Fidelity MSCI Health or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Select vs. Fidelity MSCI Health
Performance |
| Timeline |
| Health Care Select |
| Fidelity MSCI Health |
Health Care and Fidelity MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Fidelity MSCI
The main advantage of trading using opposite Health Care and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
| Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Industrials |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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