Correlation Between FLM and Fidelity MSCI

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

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

Diversification Opportunities for FLM and Fidelity MSCI

0.74

Correlation Coefficient

FLM  Fidelity MSCI

Poor diversification

The 3 months correlation between FLM and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding FLM 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 FLM 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 FLM 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 FLM i.e., FLM and Fidelity MSCI go up and down completely randomly.

Pair Corralation between FLM and Fidelity MSCI

If you would invest  4,618  in Fidelity MSCI Consumer on February 4, 2024 and sell it today you would earn a total of  94.00  from holding Fidelity MSCI Consumer or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

FLM  vs.  Fidelity MSCI Consumer

FLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, FLM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Fidelity MSCI Consumer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 9 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FLM and Fidelity MSCI

The main advantage of trading using opposite FLM and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLM 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 FLM 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.