Correlation Between Fidelity MSCI and SPDR SP

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

Diversification Opportunities for Fidelity MSCI and SPDR SP

0.94

Correlation Coefficient

Fidelity MSCI  SPDR SP

Almost no diversification

The 3 months correlation between Fidelity and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Financials and SPDR SP Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Insurance 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Insurance has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and SPDR SP go up and down completely randomly.

Pair Corralation between Fidelity MSCI and SPDR SP

Given the investment horizon of 90 days Fidelity MSCI Financials is expected to generate 1.11 times more return on investment than SPDR SP. However, Fidelity MSCI is 1.11 times more volatile than SPDR SP Insurance. It trades about 0.2 of its potential returns per unit of risk. SPDR SP Insurance is currently generating about 0.15 per unit of risk. If you would invest  6,346  in Fidelity MSCI Financials on September 2, 2024 and sell it today you would earn a total of  985.00  from holding Fidelity MSCI Financials or generate 15.52% 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 Financials  vs.  SPDR SP Insurance

Fidelity MSCI Financials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Fidelity MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity MSCI and SPDR SP

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

The idea behind Fidelity MSCI Financials and SPDR SP Insurance 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.