Correlation Between Fidelity California and Omni Small
Can any of the company-specific risk be diversified away by investing in both Fidelity California and Omni Small 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 California and Omni Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity California Municipal and Omni Small Cap Value, you can compare the effects of market volatilities on Fidelity California and Omni Small 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 California with a short position of Omni Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Omni Small.
Diversification Opportunities for Fidelity California and Omni Small
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fidelity and Omni is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap and Fidelity California 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 California Municipal are associated (or correlated) with Omni Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Small Cap has no effect on the direction of Fidelity California i.e., Fidelity California and Omni Small go up and down completely randomly.
Pair Corralation between Fidelity California and Omni Small
Assuming the 90 days horizon Fidelity California is expected to generate 2.16 times less return on investment than Omni Small. But when comparing it to its historical volatility, Fidelity California Municipal is 6.18 times less risky than Omni Small. It trades about 0.06 of its potential returns per unit of risk. Omni Small Cap Value is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,806 in Omni Small Cap Value on October 30, 2024 and sell it today you would earn a total of 58.00 from holding Omni Small Cap Value or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity California Municipal vs. Omni Small Cap Value
Performance |
| Timeline |
| Fidelity California |
| Omni Small Cap |
Fidelity California and Omni Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity California and Omni Small
The main advantage of trading using opposite Fidelity California and Omni Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity California position performs unexpectedly, Omni Small 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 Omni Small will offset losses from the drop in Omni Small's long position.The idea behind Fidelity California Municipal and Omni Small Cap Value 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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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 the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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