Correlation Between Fidelity California and Direxion Monthly

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

By analyzing existing cross correlation between Fidelity California Municipal and Direxion Monthly 7 10, you can compare the effects of market volatilities on Fidelity California and Direxion Monthly 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 California with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Direxion Monthly.

Diversification Opportunities for Fidelity California and Direxion Monthly

0.26

Correlation Coefficient

Fidelity California  Direxion Monthly

Modest diversification

The 3 months correlation between Fidelity and Direxion is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Direxion Monthly 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly 7 and Fidelity California 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 California Municipal are associated (or correlated) with Direxion Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Monthly 7 has no effect on the direction of Fidelity California i.e., Fidelity California and Direxion Monthly go up and down completely randomly.

Pair Corralation between Fidelity California and Direxion Monthly

Assuming the 90 days horizon Fidelity California Municipal is expected to generate 0.17 times more return on investment than Direxion Monthly. However, Fidelity California Municipal is 5.72 times less risky than Direxion Monthly. It trades about -0.04 of its potential returns per unit of risk. Direxion Monthly 7 10 is currently generating about -0.18 per unit of risk. If you would invest  1,230  in Fidelity California Municipal on October 9, 2024 and sell it today you would lose (9.00) from holding Fidelity California Municipal or give up 0.73% of portfolio value over 90 days.

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

Fidelity California Municipal  vs.  Direxion Monthly 7 10

Fidelity California

Risk-Adjusted Performance

0 of 100

Very Weak

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

Direxion Monthly 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Monthly 7 10 has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity California and Direxion Monthly

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

The idea behind Fidelity California Municipal and Direxion Monthly 7 10 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.