Correlation Between Exxon and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Fidelity MSCI Consumer, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Fidelity MSCI.
Diversification Opportunities for Exxon and Fidelity MSCI
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and Fidelity is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Fidelity MSCI go up and down completely randomly.
Pair Corralation between Exxon and Fidelity MSCI
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 2.03 times more return on investment than Fidelity MSCI. However, Exxon is 2.03 times more volatile than Fidelity MSCI Consumer. It trades about 0.05 of its potential returns per unit of risk. Fidelity MSCI Consumer is currently generating about 0.08 per unit of risk. If you would invest 10,007 in Exxon Mobil Corp on August 27, 2024 and sell it today you would earn a total of 2,172 from holding Exxon Mobil Corp or generate 21.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Fidelity MSCI Consumer
Performance |
| Timeline |
| Exxon Mobil Corp |
| Fidelity MSCI Consumer |
Exxon and Fidelity MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Fidelity MSCI
The main advantage of trading using opposite Exxon and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.The idea behind Exxon Mobil Corp and Fidelity MSCI Consumer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fidelity MSCI vs. Vanguard Consumer Discretionary | Fidelity MSCI vs. Vanguard Utilities Index | Fidelity MSCI vs. Vanguard Industrials Index | Fidelity MSCI 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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