Correlation Between Fidelity MSCI and Fidelity Nasdaq

Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and Fidelity Nasdaq 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 Fidelity Nasdaq 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 Fidelity Nasdaq Composite, you can compare the effects of market volatilities on Fidelity MSCI and Fidelity Nasdaq 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 Fidelity Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Fidelity Nasdaq.

Diversification Opportunities for Fidelity MSCI and Fidelity Nasdaq

0.93

Correlation Coefficient

Fidelity MSCI  Fidelity Nasdaq

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and Fidelity Nasdaq Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Nasdaq Composite 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 Fidelity Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Nasdaq Composite has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Fidelity Nasdaq go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Fidelity Nasdaq

Given the investment horizon of 90 days Fidelity MSCI Consumer is expected to generate 1.11 times more return on investment than Fidelity Nasdaq. However, Fidelity MSCI is 1.11 times more volatile than Fidelity Nasdaq Composite. It trades about 0.29 of its potential returns per unit of risk. Fidelity Nasdaq Composite is currently generating about 0.2 per unit of risk. If you would invest  8,435  in Fidelity MSCI Consumer on September 12, 2024 and sell it today you would earn a total of  1,705  from holding Fidelity MSCI Consumer or generate 20.21% return on investment over 90 days.

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

Fidelity MSCI Consumer  vs.  Fidelity Nasdaq Composite

Fidelity MSCI Consumer

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 22 (%) 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.

Fidelity Nasdaq Composite

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Nasdaq Composite are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Fidelity Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity MSCI and Fidelity Nasdaq

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

The idea behind Fidelity MSCI Consumer and Fidelity Nasdaq Composite 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.