Correlation Between Consumer Discretionary and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary 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 Consumer Discretionary and Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Discretionary Select and Fidelity MSCI Consumer, you can compare the effects of market volatilities on Consumer Discretionary 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 Consumer Discretionary with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and Fidelity MSCI.
Diversification Opportunities for Consumer Discretionary and Fidelity MSCI
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Consumer and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and Fidelity MSCI Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Consumer and Consumer Discretionary 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 Consumer Discretionary 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 Consumer has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Fidelity MSCI go up and down completely randomly.
Pair Corralation between Consumer Discretionary and Fidelity MSCI
Considering the 90-day investment horizon Consumer Discretionary is expected to generate 1.06 times less return on investment than Fidelity MSCI. But when comparing it to its historical volatility, Consumer Discretionary Select is 1.05 times less risky than Fidelity MSCI. It trades about 0.17 of its potential returns per unit of risk. Fidelity MSCI Consumer is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 9,718 in Fidelity MSCI Consumer on November 9, 2024 and sell it today you would earn a total of 327.00 from holding Fidelity MSCI Consumer or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Discretionary Select vs. Fidelity MSCI Consumer
Performance |
| Timeline |
| Consumer Discretionary |
| Fidelity MSCI Consumer |
Consumer Discretionary and Fidelity MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and Fidelity MSCI
The main advantage of trading using opposite Consumer Discretionary and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary 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.| Consumer Discretionary vs. Consumer Staples Select | Consumer Discretionary vs. Industrial Select Sector | Consumer Discretionary vs. Materials Select Sector | Consumer Discretionary vs. Health Care Select |
| Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Industrials | Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Communication |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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