Correlation Between Invesco SP and Fidelity MSCI

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

By analyzing existing cross correlation between Invesco SP 500 and Fidelity MSCI Consumer, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Fidelity MSCI.

Diversification Opportunities for Invesco SP and Fidelity MSCI

0.42

Correlation Coefficient

Invesco SP  Fidelity MSCI

Very weak diversification

The 3 months correlation between Invesco and Fidelity is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Fidelity MSCI Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Consumer and Invesco SP 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 Invesco SP 500 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 Consumer has no effect on the direction of Invesco SP i.e., Invesco SP and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Invesco SP and Fidelity MSCI

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 1.62 times more return on investment than Fidelity MSCI. However, Invesco SP is 1.62 times more volatile than Fidelity MSCI Consumer. It trades about 0.2 of its potential returns per unit of risk. Fidelity MSCI Consumer is currently generating about 0.3 per unit of risk. If you would invest  5,413  in Invesco SP 500 on September 12, 2024 and sell it today you would earn a total of  184.00  from holding Invesco SP 500 or generate 3.4% return on investment over 90 days.

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

Invesco SP 500  vs.  Fidelity MSCI Consumer

Invesco SP 500

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Invesco SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fidelity MSCI Consumer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco SP and Fidelity MSCI

The main advantage of trading using opposite Invesco SP and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP 500 and Fidelity MSCI Consumer 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.