Correlation Between Fidelity MSCI and IShares Core

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

By analyzing existing cross correlation between Fidelity MSCI Real and iShares Core REIT, you can compare the effects of market volatilities on Fidelity MSCI and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and IShares Core.

Diversification Opportunities for Fidelity MSCI and IShares Core

0.99

Correlation Coefficient

Fidelity MSCI  IShares Core

No risk reduction

The 3 months correlation between Fidelity and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Real and iShares Core REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core REIT 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 Real are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core REIT has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and IShares Core go up and down completely randomly.

Pair Corralation between Fidelity MSCI and IShares Core

Given the investment horizon of 90 days Fidelity MSCI Real is expected to under-perform the IShares Core. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity MSCI Real is 1.01 times less risky than IShares Core. The etf trades about -0.14 of its potential returns per unit of risk. The iShares Core REIT is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  5,212  in iShares Core REIT on January 25, 2024 and sell it today you would lose (151.00) from holding iShares Core REIT or give up 2.9% of portfolio value over 90 days.

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

Fidelity MSCI Real  vs.  iShares Core REIT

Fidelity MSCI Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity MSCI Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

iShares Core REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity MSCI and IShares Core

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

The idea behind Fidelity MSCI Real and iShares Core REIT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.