Correlation Between Fidelity Municipal and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Fidelity Municipal and Fidelity Advisor 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 Advisor 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 Advisor Freedom, you can compare the effects of market volatilities on Fidelity Municipal and Fidelity Advisor 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 Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Municipal and Fidelity Advisor.
Diversification Opportunities for Fidelity Municipal and Fidelity Advisor
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and Fidelity Advisor Freedom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Freedom 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 Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Freedom has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Fidelity Municipal and Fidelity Advisor
Assuming the 90 days horizon Fidelity Municipal is expected to generate 1.61 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Fidelity Municipal Income is 1.23 times less risky than Fidelity Advisor. It trades about 0.07 of its potential returns per unit of risk. Fidelity Advisor Freedom is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 909.00 in Fidelity Advisor Freedom on November 29, 2024 and sell it today you would earn a total of 126.00 from holding Fidelity Advisor Freedom or generate 13.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fidelity Municipal Income vs. Fidelity Advisor Freedom
Performance |
| Timeline |
| Fidelity Municipal Income |
| Fidelity Advisor Freedom |
Fidelity Municipal and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Municipal and Fidelity Advisor
The main advantage of trading using opposite Fidelity Municipal and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Municipal position performs unexpectedly, Fidelity Advisor 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 Advisor will offset losses from the drop in Fidelity Advisor's long position.| Fidelity Municipal vs. Global Diversified Income | Fidelity Municipal vs. Blackrock Diversified Fixed | Fidelity Municipal vs. Lord Abbett Diversified | Fidelity Municipal vs. Wilmington Diversified Income |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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