Correlation Between IShares Mortgage and Fidelity MSCI

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

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

Diversification Opportunities for IShares Mortgage and Fidelity MSCI

0.61

Correlation Coefficient

IShares Mortgage  Fidelity MSCI

Poor diversification

The 3 months correlation between IShares and Fidelity is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Mortgage Real and Fidelity MSCI Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Real and IShares Mortgage 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 iShares Mortgage Real 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 Real has no effect on the direction of IShares Mortgage i.e., IShares Mortgage and Fidelity MSCI go up and down completely randomly.

Pair Corralation between IShares Mortgage and Fidelity MSCI

Considering the 90-day investment horizon iShares Mortgage Real is expected to generate 1.31 times more return on investment than Fidelity MSCI. However, IShares Mortgage is 1.31 times more volatile than Fidelity MSCI Real. It trades about -0.01 of its potential returns per unit of risk. Fidelity MSCI Real is currently generating about -0.02 per unit of risk. If you would invest  2,439  in iShares Mortgage Real on January 19, 2024 and sell it today you would lose (306.00) from holding iShares Mortgage Real or give up 12.55% of portfolio value over 90 days.

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

iShares Mortgage Real  vs.  Fidelity MSCI Real

iShares Mortgage Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Mortgage Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

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 latest inconsistent performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with IShares Mortgage and Fidelity MSCI

The main advantage of trading using opposite IShares Mortgage and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Mortgage 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 iShares Mortgage Real and Fidelity MSCI Real 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.