Correlation Between California Municipal and Fidelity California
Can any of the company-specific risk be diversified away by investing in both California Municipal and Fidelity California 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 California Municipal and Fidelity California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Municipal Portfolio and Fidelity California Municipal, you can compare the effects of market volatilities on California Municipal and Fidelity California 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 California Municipal with a short position of Fidelity California. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Fidelity California.
Diversification Opportunities for California Municipal and Fidelity California
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Fidelity California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity California and California 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 California Municipal Portfolio are associated (or correlated) with Fidelity California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity California has no effect on the direction of California Municipal i.e., California Municipal and Fidelity California go up and down completely randomly.
Pair Corralation between California Municipal and Fidelity California
Assuming the 90 days horizon California Municipal is expected to generate 1.18 times less return on investment than Fidelity California. But when comparing it to its historical volatility, California Municipal Portfolio is 1.58 times less risky than Fidelity California. It trades about 0.07 of its potential returns per unit of risk. Fidelity California Municipal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,145 in Fidelity California Municipal on October 27, 2024 and sell it today you would earn a total of 67.00 from holding Fidelity California Municipal or generate 5.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Municipal Portfolio vs. Fidelity California Municipal
Performance |
| Timeline |
| California Municipal |
| Fidelity California |
California Municipal and Fidelity California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and Fidelity California
The main advantage of trading using opposite California Municipal and Fidelity California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, Fidelity California 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 California will offset losses from the drop in Fidelity California's long position.| California Municipal vs. Artisan High Income | California Municipal vs. Franklin Government Money | California Municipal vs. Ab Bond Inflation | California Municipal vs. Blrc Sgy Mnp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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