Correlation Between Fidelity Capital and California Tax-free

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

By analyzing existing cross correlation between Fidelity Capital Income and California Tax Free Fund, you can compare the effects of market volatilities on Fidelity Capital and California Tax-free 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 Capital with a short position of California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Capital and California Tax-free.

Diversification Opportunities for Fidelity Capital and California Tax-free

0.14

Correlation Coefficient

Fidelity Capital  California Tax-free

Average diversification

The 3 months correlation between Fidelity and California is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Capital Income and California Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free and Fidelity Capital 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 Capital Income are associated (or correlated) with California Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Fidelity Capital i.e., Fidelity Capital and California Tax-free go up and down completely randomly.

Pair Corralation between Fidelity Capital and California Tax-free

Assuming the 90 days horizon Fidelity Capital Income is expected to under-perform the California Tax-free. In addition to that, Fidelity Capital is 1.89 times more volatile than California Tax Free Fund. It trades about -0.01 of its total potential returns per unit of risk. California Tax Free Fund is currently generating about 0.02 per unit of volatility. If you would invest  1,068  in California Tax Free Fund on December 22, 2024 and sell it today you would earn a total of  3.00  from holding California Tax Free Fund or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fidelity Capital Income  vs.  California Tax Free Fund

Fidelity Capital Income

Risk-Adjusted Performance

Very Weak

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

California Tax Free

Risk-Adjusted Performance

Weak

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

Pair Trading with Fidelity Capital and California Tax-free

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

The idea behind Fidelity Capital Income and California Tax Free Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.