Correlation Between Fidelity California and Fidelity Intermediate
Can any of the company-specific risk be diversified away by investing in both Fidelity California and Fidelity Intermediate 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 Fidelity Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity California Limited and Fidelity Intermediate Municipal, you can compare the effects of market volatilities on Fidelity California and Fidelity Intermediate 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 Fidelity Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Fidelity Intermediate.
Diversification Opportunities for Fidelity California and Fidelity Intermediate
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Limited and Fidelity Intermediate Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Intermediate 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 Limited are associated (or correlated) with Fidelity Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Intermediate has no effect on the direction of Fidelity California i.e., Fidelity California and Fidelity Intermediate go up and down completely randomly.
Pair Corralation between Fidelity California and Fidelity Intermediate
Assuming the 90 days horizon Fidelity California is expected to generate 1.2 times less return on investment than Fidelity Intermediate. But when comparing it to its historical volatility, Fidelity California Limited is 1.42 times less risky than Fidelity Intermediate. It trades about 0.1 of its potential returns per unit of risk. Fidelity Intermediate Municipal is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 983.00 in Fidelity Intermediate Municipal on September 3, 2024 and sell it today you would earn a total of 35.00 from holding Fidelity Intermediate Municipal or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity California Limited vs. Fidelity Intermediate Municipa
Performance |
| Timeline |
| Fidelity California |
| Fidelity Intermediate |
Fidelity California and Fidelity Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity California and Fidelity Intermediate
The main advantage of trading using opposite Fidelity California and Fidelity Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity California position performs unexpectedly, Fidelity Intermediate 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 Intermediate will offset losses from the drop in Fidelity Intermediate's long position.The idea behind Fidelity California Limited and Fidelity Intermediate Municipal 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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