Correlation Between Merck and Fidelity Municipal
Can any of the company-specific risk be diversified away by investing in both Merck and Fidelity Municipal 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 Merck and Fidelity Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Fidelity Municipal Income, you can compare the effects of market volatilities on Merck and Fidelity Municipal 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 Merck with a short position of Fidelity Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Fidelity Municipal.
Diversification Opportunities for Merck and Fidelity Municipal
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Fidelity is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Fidelity Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Municipal Income and Merck 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 Merck Company are associated (or correlated) with Fidelity Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Municipal Income has no effect on the direction of Merck i.e., Merck and Fidelity Municipal go up and down completely randomly.
Pair Corralation between Merck and Fidelity Municipal
Considering the 90-day investment horizon Merck Company is expected to under-perform the Fidelity Municipal. In addition to that, Merck is 27.39 times more volatile than Fidelity Municipal Income. It trades about -0.16 of its total potential returns per unit of risk. Fidelity Municipal Income is currently generating about 0.29 per unit of volatility. If you would invest 996.00 in Fidelity Municipal Income on August 24, 2024 and sell it today you would earn a total of 3.00 from holding Fidelity Municipal Income or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Merck Company vs. Fidelity Municipal Income
Performance |
| Timeline |
| Merck Company |
| Fidelity Municipal Income |
Merck and Fidelity Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Fidelity Municipal
The main advantage of trading using opposite Merck and Fidelity Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Fidelity Municipal 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 Municipal will offset losses from the drop in Fidelity Municipal's long position.The idea behind Merck Company and Fidelity Municipal Income 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.| Fidelity Municipal vs. Morningstar Defensive Bond | Fidelity Municipal vs. Versatile Bond Portfolio | Fidelity Municipal vs. Pace Municipal Fixed | Fidelity Municipal vs. T Rowe Price |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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