Correlation Between Fidelity Covington and IShares MSCI

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

By analyzing existing cross correlation between Fidelity Covington Trust and iShares MSCI China, you can compare the effects of market volatilities on Fidelity Covington and IShares 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 Fidelity Covington with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Covington and IShares MSCI.

Diversification Opportunities for Fidelity Covington and IShares MSCI

-0.1

Correlation Coefficient

Fidelity Covington  IShares MSCI

Good diversification

The 3 months correlation between Fidelity and IShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China and Fidelity Covington 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 Covington Trust are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI China has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and IShares MSCI go up and down completely randomly.

Pair Corralation between Fidelity Covington and IShares MSCI

Given the investment horizon of 90 days Fidelity Covington Trust is expected to generate 0.29 times more return on investment than IShares MSCI. However, Fidelity Covington Trust is 3.5 times less risky than IShares MSCI. It trades about 0.03 of its potential returns per unit of risk. iShares MSCI China is currently generating about -0.01 per unit of risk. If you would invest  2,533  in Fidelity Covington Trust on September 27, 2024 and sell it today you would earn a total of  15.00  from holding Fidelity Covington Trust or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.5%
Values	Daily Returns

Fidelity Covington Trust  vs.  iShares MSCI China

Fidelity Covington Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fidelity Covington and IShares MSCI

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

The idea behind Fidelity Covington Trust and iShares MSCI China 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.