Correlation Between Fidelity MSCI and IShares IV

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

By analyzing existing cross correlation between Fidelity MSCI Financials and iShares IV Public, you can compare the effects of market volatilities on Fidelity MSCI and IShares IV 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 IShares IV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and IShares IV.

Diversification Opportunities for Fidelity MSCI and IShares IV

-0.48

Correlation Coefficient

Fidelity MSCI  IShares IV

Very good diversification

The 3 months correlation between Fidelity and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Financials and iShares IV Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares IV Public 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 Financials are associated (or correlated) with IShares IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares IV Public has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares IV go up and down completely randomly.

Pair Corralation between Fidelity MSCI and IShares IV

Given the investment horizon of 90 days Fidelity MSCI Financials is expected to generate 1.85 times more return on investment than IShares IV. However, Fidelity MSCI is 1.85 times more volatile than iShares IV Public. It trades about 0.13 of its potential returns per unit of risk. iShares IV Public is currently generating about -0.09 per unit of risk. If you would invest  6,316  in Fidelity MSCI Financials on September 26, 2024 and sell it today you would earn a total of  652.00  from holding Fidelity MSCI Financials or generate 10.32% return on investment over 90 days.

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

Fidelity MSCI Financials  vs.  iShares IV Public

Fidelity MSCI Financials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares IV Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares IV Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares IV is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fidelity MSCI and IShares IV

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

The idea behind Fidelity MSCI Financials and iShares IV Public 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.