Correlation Between Northern Institutional and Fidelity Municipal

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

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

Diversification Opportunities for Northern Institutional and Fidelity Municipal

0.28

Correlation Coefficient

Northern Institutional  Fidelity Municipal

Modest diversification

The 3 months correlation between Northern and Fidelity is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Northern Institutional Funds 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 Northern Institutional 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 Northern Institutional Funds 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 Northern Institutional i.e., Northern Institutional and Fidelity Municipal go up and down completely randomly.

Pair Corralation between Northern Institutional and Fidelity Municipal

If you would invest  997.00  in Fidelity Municipal Income on September 27, 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 Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Northern Institutional Funds  vs.  Fidelity Municipal Income

Northern Institutional

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Institutional Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Northern Institutional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Municipal Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Municipal Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Institutional and Fidelity Municipal

The main advantage of trading using opposite Northern Institutional and Fidelity Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Institutional 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 Northern Institutional Funds 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.