Correlation Between Fidelity Massachusetts and Fidelity Connecticut
Can any of the company-specific risk be diversified away by investing in both Fidelity Massachusetts and Fidelity Connecticut 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 Massachusetts and Fidelity Connecticut into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Massachusetts Municipal and Fidelity Necticut Municipal, you can compare the effects of market volatilities on Fidelity Massachusetts and Fidelity Connecticut 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 Massachusetts with a short position of Fidelity Connecticut. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Massachusetts and Fidelity Connecticut.
Diversification Opportunities for Fidelity Massachusetts and Fidelity Connecticut
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Massachusetts Municip and Fidelity Necticut Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Connecticut and Fidelity Massachusetts 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 Massachusetts Municipal are associated (or correlated) with Fidelity Connecticut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Connecticut has no effect on the direction of Fidelity Massachusetts i.e., Fidelity Massachusetts and Fidelity Connecticut go up and down completely randomly.
Pair Corralation between Fidelity Massachusetts and Fidelity Connecticut
Assuming the 90 days horizon Fidelity Massachusetts is expected to generate 1.25 times less return on investment than Fidelity Connecticut. But when comparing it to its historical volatility, Fidelity Massachusetts Municipal is 1.01 times less risky than Fidelity Connecticut. It trades about 0.15 of its potential returns per unit of risk. Fidelity Necticut Municipal is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,091 in Fidelity Necticut Municipal on September 3, 2024 and sell it today you would earn a total of 12.00 from holding Fidelity Necticut Municipal or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Massachusetts Municip vs. Fidelity Necticut Municipal
Performance |
| Timeline |
| Fidelity Massachusetts |
| Fidelity Connecticut |
Fidelity Massachusetts and Fidelity Connecticut Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Massachusetts and Fidelity Connecticut
The main advantage of trading using opposite Fidelity Massachusetts and Fidelity Connecticut positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Massachusetts position performs unexpectedly, Fidelity Connecticut 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 Connecticut will offset losses from the drop in Fidelity Connecticut's long position.The idea behind Fidelity Massachusetts Municipal and Fidelity Necticut 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.
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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