Correlation Between SP 500 and Fidelity Utilities

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Can any of the company-specific risk be diversified away by investing in both SP 500 and Fidelity Utilities 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 SP 500 and Fidelity Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 Utilities and Fidelity Utilities MSCI, you can compare the effects of market volatilities on SP 500 and Fidelity Utilities 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 SP 500 with a short position of Fidelity Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Fidelity Utilities.

Diversification Opportunities for SP 500 and Fidelity Utilities

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between SP 500 and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 Utilities and Fidelity Utilities MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Utilities MSCI and SP 500 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 SP 500 Utilities are associated (or correlated) with Fidelity Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Utilities MSCI has no effect on the direction of SP 500 i.e., SP 500 and Fidelity Utilities go up and down completely randomly.

Pair Corralation between SP 500 and Fidelity Utilities

Considering the 90-day investment horizon SP 500 Utilities is expected to generate 1.0 times more return on investment than Fidelity Utilities. However, SP 500 Utilities is 1.0 times less risky than Fidelity Utilities. It trades about 0.29 of its potential returns per unit of risk. Fidelity Utilities MSCI is currently generating about 0.27 per unit of risk. If you would invest  6,625  in SP 500 Utilities on May 16, 2022 and sell it today you would earn a total of  1,047  from holding SP 500 Utilities or generate 15.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SP 500 Utilities  vs.  Fidelity Utilities MSCI

 Performance (%) 
       Timeline  
SP 500 Utilities 
SP 500 Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 Utilities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, SP 500 may actually be approaching a critical reversion point that can send shares even higher in September 2022.

SP 500 Price Channel

Fidelity Utilities MSCI 
Fidelity Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Utilities MSCI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Fidelity Utilities may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Fidelity Price Channel

SP 500 and Fidelity Utilities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SP 500 and Fidelity Utilities

The main advantage of trading using opposite SP 500 and Fidelity Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Fidelity Utilities 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 Utilities will offset losses from the drop in Fidelity Utilities' long position.

SP 500 Utilities

Pair trading matchups for SP 500

The idea behind SP 500 Utilities and Fidelity Utilities MSCI 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.

Fidelity Utilities MSCI

Pair trading matchups for Fidelity Utilities

Check out your portfolio center. 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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