Correlation Between SPDR SP and Fidelity MSCI

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

Diversification Opportunities for SPDR SP and Fidelity MSCI

0.76

Correlation Coefficient

SPDR SP  Fidelity MSCI

Poor diversification

The 3 months correlation between SPDR and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and Fidelity MSCI Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Materials and SPDR 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 SPDR SP Metals 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 Materials has no effect on the direction of SPDR SP i.e., SPDR SP and Fidelity MSCI go up and down completely randomly.

Pair Corralation between SPDR SP and Fidelity MSCI

Considering the 90-day investment horizon SPDR SP Metals is expected to under-perform the Fidelity MSCI. In addition to that, SPDR SP is 1.46 times more volatile than Fidelity MSCI Materials. It trades about -0.7 of its total potential returns per unit of risk. Fidelity MSCI Materials is currently generating about -0.59 per unit of volatility. If you would invest  5,438  in Fidelity MSCI Materials on September 25, 2024 and sell it today you would lose (545.50) from holding Fidelity MSCI Materials or give up 10.03% of portfolio value over 90 days.

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

SPDR SP Metals  vs.  Fidelity MSCI Materials

SPDR SP Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Fidelity MSCI Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity MSCI Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with SPDR SP and Fidelity MSCI

The main advantage of trading using opposite SPDR SP and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR 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 SPDR SP Metals and Fidelity MSCI Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.