Correlation Between Fidelity MSCI and ProShares Short

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

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

Diversification Opportunities for Fidelity MSCI and ProShares Short

-0.99

Correlation Coefficient

Fidelity MSCI  ProShares Short

Pay attention - limited upside

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

Pair Corralation between Fidelity MSCI and ProShares Short

Given the investment horizon of 90 days Fidelity MSCI Financials is expected to under-perform the ProShares Short. In addition to that, Fidelity MSCI is 1.08 times more volatile than ProShares Short Financials. It trades about -0.18 of its total potential returns per unit of risk. ProShares Short Financials is currently generating about 0.22 per unit of volatility. If you would invest  1,018  in ProShares Short Financials on January 28, 2024 and sell it today you would earn a total of  38.00  from holding ProShares Short Financials or generate 3.73% return on investment over 90 days.

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

Fidelity MSCI Financials  vs.  ProShares Short Financials

Fidelity MSCI Financials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Financials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ProShares Short Fina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Short Financials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ProShares Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fidelity MSCI and ProShares Short

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

The idea behind Fidelity MSCI Financials and ProShares Short Financials 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 Transaction History module to view history of all your transactions and understand their impact on performance.