Correlation Between Fidelity California and Fidelity Pennsylvania
Can any of the company-specific risk be diversified away by investing in both Fidelity California and Fidelity Pennsylvania 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 Pennsylvania 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 Fidelity Pennsylvania Municipal, you can compare the effects of market volatilities on Fidelity California and Fidelity Pennsylvania 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 Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Fidelity Pennsylvania.
Diversification Opportunities for Fidelity California and Fidelity Pennsylvania
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 Municipal and Fidelity Pennsylvania Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Pennsylvania 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 Fidelity Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Pennsylvania has no effect on the direction of Fidelity California i.e., Fidelity California and Fidelity Pennsylvania go up and down completely randomly.
Pair Corralation between Fidelity California and Fidelity Pennsylvania
Assuming the 90 days horizon Fidelity California Municipal is expected to generate 1.13 times more return on investment than Fidelity Pennsylvania. However, Fidelity California is 1.13 times more volatile than Fidelity Pennsylvania Municipal. It trades about 0.1 of its potential returns per unit of risk. Fidelity Pennsylvania Municipal is currently generating about 0.1 per unit of risk. If you would invest 1,176 in Fidelity California Municipal on September 2, 2024 and sell it today you would earn a total of 61.00 from holding Fidelity California Municipal or generate 5.19% 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 Municipal vs. Fidelity Pennsylvania Municipa
Performance |
| Timeline |
| Fidelity California |
| Fidelity Pennsylvania |
Fidelity California and Fidelity Pennsylvania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity California and Fidelity Pennsylvania
The main advantage of trading using opposite Fidelity California and Fidelity Pennsylvania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity California position performs unexpectedly, Fidelity Pennsylvania 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 Pennsylvania will offset losses from the drop in Fidelity Pennsylvania's long position.| Fidelity California vs. Fidelity California Limited | Fidelity California vs. Fidelity Municipal Income | Fidelity California vs. Fidelity Tax Free Bond | Fidelity California vs. Fidelity Limited Term |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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