Correlation Between IShares Semiconductor and Fidelity MSCI

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

Diversification Opportunities for IShares Semiconductor and Fidelity MSCI

0.81

Correlation Coefficient

IShares Semiconductor  Fidelity MSCI

Very poor diversification

The 3 months correlation between IShares and Fidelity is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and Fidelity MSCI Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Information and IShares Semiconductor 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 Semiconductor ETF 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 Information has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and Fidelity MSCI go up and down completely randomly.

Pair Corralation between IShares Semiconductor and Fidelity MSCI

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the Fidelity MSCI. In addition to that, IShares Semiconductor is 1.47 times more volatile than Fidelity MSCI Information. It trades about -0.11 of its total potential returns per unit of risk. Fidelity MSCI Information is currently generating about -0.12 per unit of volatility. If you would invest  15,592  in Fidelity MSCI Information on January 31, 2024 and sell it today you would lose (563.00) from holding Fidelity MSCI Information or give up 3.61% of portfolio value over 90 days.

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

iShares Semiconductor ETF  vs.  Fidelity MSCI Information

iShares Semiconductor ETF

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares Semiconductor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Fidelity MSCI Information

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Semiconductor and Fidelity MSCI

The main advantage of trading using opposite IShares Semiconductor and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Semiconductor 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 Semiconductor ETF and Fidelity MSCI Information 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.