Correlation Between GATX and Fidelity MSCI

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

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

Diversification Opportunities for GATX and Fidelity MSCI

0.78

Correlation Coefficient

GATX  Fidelity MSCI

Poor diversification

The 3 months correlation between GATX and Fidelity is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp. and Fidelity MSCI Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Energy and GATX 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 GATX Corporation 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 Energy has no effect on the direction of GATX i.e., GATX and Fidelity MSCI go up and down completely randomly.

Pair Corralation between GATX and Fidelity MSCI

Given the investment horizon of 90 days GATX is expected to generate 40.61 times less return on investment than Fidelity MSCI. In addition to that, GATX is 1.49 times more volatile than Fidelity MSCI Energy. It trades about 0.01 of its total potential returns per unit of risk. Fidelity MSCI Energy is currently generating about 0.38 per unit of volatility. If you would invest  2,341  in Fidelity MSCI Energy on January 24, 2024 and sell it today you would earn a total of  289.00  from holding Fidelity MSCI Energy or generate 12.35% return on investment over 90 days.

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

GATX Corp.  vs.  Fidelity MSCI Energy

GATX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, GATX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fidelity MSCI Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Fidelity MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GATX and Fidelity MSCI

The main advantage of trading using opposite GATX and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GATX 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 GATX Corporation and Fidelity MSCI Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.