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 Renewable and Fidelity MSCI Utilities, 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

-0.4

Correlation Coefficient

Global X  Fidelity MSCI

Very good diversification

The 3 months correlation between Global and Fidelity is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Global X Renewable and Fidelity MSCI Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Utilities 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 Renewable 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 Utilities 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 Renewable is expected to under-perform the Fidelity MSCI. In addition to that, Global X is 1.35 times more volatile than Fidelity MSCI Utilities. It trades about -0.11 of its total potential returns per unit of risk. Fidelity MSCI Utilities is currently generating about 0.15 per unit of volatility. If you would invest  4,873  in Fidelity MSCI Utilities on September 2, 2024 and sell it today you would earn a total of  465.00  from holding Fidelity MSCI Utilities or generate 9.54% return on investment over 90 days.

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

Global X Renewable  vs.  Fidelity MSCI Utilities

Global X Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Fidelity MSCI Utilities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Utilities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Renewable and Fidelity MSCI Utilities 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.