Correlation Between MicroSectors Solactive and Fidelity MSCI

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

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

Diversification Opportunities for MicroSectors Solactive and Fidelity MSCI

0.99

Correlation Coefficient

MicroSectors Solactive  Fidelity MSCI

No risk reduction

The 3 months correlation between MicroSectors and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and Fidelity MSCI Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Information and MicroSectors Solactive 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 MicroSectors Solactive FANG 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 Information has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and Fidelity MSCI go up and down completely randomly.

Pair Corralation between MicroSectors Solactive and Fidelity MSCI

Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to generate 3.4 times more return on investment than Fidelity MSCI. However, MicroSectors Solactive is 3.4 times more volatile than Fidelity MSCI Information. It trades about 0.21 of its potential returns per unit of risk. Fidelity MSCI Information is currently generating about 0.27 per unit of risk. If you would invest  10,852  in MicroSectors Solactive FANG on May 4, 2025 and sell it today you would earn a total of  6,133  from holding MicroSectors Solactive FANG or generate 56.51% return on investment over 90 days.

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

MicroSectors Solactive FANG  vs.  Fidelity MSCI Information

MicroSectors Solactive

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Solactive FANG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, MicroSectors Solactive showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity MSCI Information

Risk-Adjusted Performance

Solid

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

Pair Trading with MicroSectors Solactive and Fidelity MSCI

The main advantage of trading using opposite MicroSectors Solactive and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive 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 MicroSectors Solactive FANG and Fidelity MSCI Information 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.