Correlation Between Invesco Water and Fidelity MSCI

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

Diversification Opportunities for Invesco Water and Fidelity MSCI

0.74

Correlation Coefficient

Invesco Water  Fidelity MSCI

Poor diversification

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

Pair Corralation between Invesco Water and Fidelity MSCI

Considering the 90-day investment horizon Invesco Water Resources is expected to generate 1.14 times more return on investment than Fidelity MSCI. However, Invesco Water is 1.14 times more volatile than Fidelity MSCI Materials. It trades about 0.02 of its potential returns per unit of risk. Fidelity MSCI Materials is currently generating about -0.04 per unit of risk. If you would invest  6,506  in Invesco Water Resources on March 19, 2024 and sell it today you would earn a total of  52.00  from holding Invesco Water Resources or generate 0.8% return on investment over 90 days.

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

Invesco Water Resources  vs.  Fidelity MSCI Materials

Invesco Water Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Water Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Invesco Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 comparatively stable basic indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Water and Fidelity MSCI

The main advantage of trading using opposite Invesco Water and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Water 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 Water Resources 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.