Correlation Between Fidelity MSCI and ALPS Global

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

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

Diversification Opportunities for Fidelity MSCI and ALPS Global

0.75

Correlation Coefficient

Fidelity MSCI  ALPS Global

Poor diversification

The 3 months correlation between Fidelity and ALPS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and ALPS Global Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Global Travel and Fidelity MSCI 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 Fidelity MSCI Consumer are associated (or correlated) with ALPS Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Global Travel has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and ALPS Global go up and down completely randomly.

Pair Corralation between Fidelity MSCI and ALPS Global

Given the investment horizon of 90 days Fidelity MSCI Consumer is expected to generate 0.84 times more return on investment than ALPS Global. However, Fidelity MSCI Consumer is 1.19 times less risky than ALPS Global. It trades about -0.03 of its potential returns per unit of risk. ALPS Global Travel is currently generating about -0.14 per unit of risk. If you would invest  8,081  in Fidelity MSCI Consumer on March 16, 2024 and sell it today you would lose (45.00) from holding Fidelity MSCI Consumer or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Fidelity MSCI Consumer  vs.  ALPS Global Travel

Fidelity MSCI Consumer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward 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.

ALPS Global Travel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS Global Travel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ALPS Global is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity MSCI and ALPS Global

The main advantage of trading using opposite Fidelity MSCI and ALPS Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, ALPS Global 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 ALPS Global will offset losses from the drop in ALPS Global's long position.

The idea behind Fidelity MSCI Consumer and ALPS Global Travel 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.