Correlation Between Fidelity Covington and IShares Global

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

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

Diversification Opportunities for Fidelity Covington and IShares Global

0.63

Correlation Coefficient

Fidelity Covington  IShares Global

Poor diversification

The 3 months correlation between Fidelity and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and iShares Global Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Tech and Fidelity Covington 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 Covington Trust are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Tech has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and IShares Global go up and down completely randomly.

Pair Corralation between Fidelity Covington and IShares Global

Given the investment horizon of 90 days Fidelity Covington Trust is expected to under-perform the IShares Global. In addition to that, Fidelity Covington is 1.23 times more volatile than iShares Global Tech. It trades about -0.04 of its total potential returns per unit of risk. iShares Global Tech is currently generating about 0.09 per unit of volatility. If you would invest  4,614  in iShares Global Tech on March 31, 2024 and sell it today you would earn a total of  3,668  from holding iShares Global Tech or generate 79.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Fidelity Covington Trust  vs.  iShares Global Tech

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Global Tech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Tech are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Fidelity Covington and IShares Global

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

The idea behind Fidelity Covington Trust and iShares Global Tech 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.