Correlation Between Fidelity Municipal and Fidelity Tax-free
Can any of the company-specific risk be diversified away by investing in both Fidelity Municipal and Fidelity Tax-free 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 Municipal and Fidelity Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Municipal Income and Fidelity Tax Free Bond, you can compare the effects of market volatilities on Fidelity Municipal and Fidelity Tax-free 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 Municipal with a short position of Fidelity Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Municipal and Fidelity Tax-free.
Diversification Opportunities for Fidelity Municipal and Fidelity Tax-free
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and Fidelity Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Tax Free and Fidelity Municipal 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 Municipal Income are associated (or correlated) with Fidelity Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Tax Free has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and Fidelity Tax-free go up and down completely randomly.
Pair Corralation between Fidelity Municipal and Fidelity Tax-free
Assuming the 90 days horizon Fidelity Municipal Income is expected to generate 0.97 times more return on investment than Fidelity Tax-free. However, Fidelity Municipal Income is 1.03 times less risky than Fidelity Tax-free. It trades about 0.0 of its potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about -0.02 per unit of risk. If you would invest 1,221 in Fidelity Municipal Income on November 3, 2024 and sell it today you would earn a total of 0.00 from holding Fidelity Municipal Income or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fidelity Municipal Income vs. Fidelity Tax Free Bond
Performance |
| Timeline |
| Fidelity Municipal Income |
| Fidelity Tax Free |
Fidelity Municipal and Fidelity Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Municipal and Fidelity Tax-free
The main advantage of trading using opposite Fidelity Municipal and Fidelity Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Municipal position performs unexpectedly, Fidelity Tax-free 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 Tax-free will offset losses from the drop in Fidelity Tax-free's long position.| Fidelity Municipal vs. Fidelity Tax Free Bond | Fidelity Municipal vs. Fidelity Intermediate Municipal | Fidelity Municipal vs. Fidelity Limited Term | Fidelity Municipal vs. Fidelity Gnma Fund |
| Fidelity Tax-free vs. Rational Defensive Growth | Fidelity Tax-free vs. Stringer Growth Fund | Fidelity Tax-free vs. Growth Portfolio Class | Fidelity Tax-free vs. Tfa Alphagen Growth |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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