Correlation Between Fidelity MSCI and Global X

Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity MSCI Consumer and Global X E commerce, you can compare the effects of market volatilities on Fidelity MSCI and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Global X.

Diversification Opportunities for Fidelity MSCI and Global X

0.79

Correlation Coefficient

Fidelity MSCI  Global X

Poor diversification

The 3 months correlation between Fidelity and Global is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and Global X E commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X E 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 Consumer are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X E has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Global X go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Global X

Given the investment horizon of 90 days Fidelity MSCI is expected to generate 1.1 times less return on investment than Global X. But when comparing it to its historical volatility, Fidelity MSCI Consumer is 1.11 times less risky than Global X. It trades about 0.26 of its potential returns per unit of risk. Global X E commerce is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,386  in Global X E commerce on September 2, 2024 and sell it today you would earn a total of  508.00  from holding Global X E commerce or generate 21.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fidelity MSCI Consumer  vs.  Global X E commerce

Fidelity MSCI Consumer

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Fidelity MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Global X E

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X E commerce are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity MSCI and Global X

The main advantage of trading using opposite Fidelity MSCI and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.

The idea behind Fidelity MSCI Consumer and Global X E commerce 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.