Correlation Between Global X and Fidelity MSCI

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

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

Diversification Opportunities for Global X and Fidelity MSCI

0.57

Correlation Coefficient

Global X  Fidelity MSCI

Very weak diversification

The 3 months correlation between Global and Fidelity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Global X Thematic and Fidelity MSCI Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Commun and Global X 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 Global X Thematic are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Commun has no effect on the direction of Global X i.e., Global X and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Global X and Fidelity MSCI

Given the investment horizon of 90 days Global X is expected to generate 2.29 times less return on investment than Fidelity MSCI. In addition to that, Global X is 1.57 times more volatile than Fidelity MSCI Communication. It trades about 0.07 of its total potential returns per unit of risk. Fidelity MSCI Communication is currently generating about 0.27 per unit of volatility. If you would invest  5,295  in Fidelity MSCI Communication on September 16, 2024 and sell it today you would earn a total of  820.00  from holding Fidelity MSCI Communication or generate 15.49% return on investment over 90 days.

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

Global X Thematic  vs.  Fidelity MSCI Communication

Global X Thematic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Thematic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fidelity MSCI Commun

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Communication are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Fidelity MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Fidelity MSCI

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

The idea behind Global X Thematic and Fidelity MSCI Communication 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.