Correlation Between Diversified Municipal and Fidelity Servative

Can any of the company-specific risk be diversified away by investing in both Diversified Municipal and Fidelity Servative 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 Diversified Municipal and Fidelity Servative into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diversified Municipal Portfolio and Fidelity Servative Income, you can compare the effects of market volatilities on Diversified Municipal and Fidelity Servative 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 Diversified Municipal with a short position of Fidelity Servative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Municipal and Fidelity Servative.

Diversification Opportunities for Diversified Municipal and Fidelity Servative

0.31

Correlation Coefficient

Diversified Municipal  Fidelity Servative

Weak diversification

The 3 months correlation between Diversified and Fidelity is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Municipal Portfoli and Fidelity Servative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Servative Income and Diversified 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 Diversified Municipal Portfolio are associated (or correlated) with Fidelity Servative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Servative Income has no effect on the direction of Diversified Municipal i.e., Diversified Municipal and Fidelity Servative go up and down completely randomly.

Pair Corralation between Diversified Municipal and Fidelity Servative

If you would invest  1,379  in Diversified Municipal Portfolio on October 26, 2024 and sell it today you would earn a total of  2.00  from holding Diversified Municipal Portfolio or generate 0.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.69%
Values	Daily Returns

Diversified Municipal Portfoli  vs.  Fidelity Servative Income

Diversified Municipal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Municipal Portfolio are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Diversified Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Servative Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Servative Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Fidelity Servative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diversified Municipal and Fidelity Servative

The main advantage of trading using opposite Diversified Municipal and Fidelity Servative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Municipal position performs unexpectedly, Fidelity Servative 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 Servative will offset losses from the drop in Fidelity Servative's long position.

The idea behind Diversified Municipal Portfolio and Fidelity Servative 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.