Correlation Between Fidelity California and Victory High

Can any of the company-specific risk be diversified away by investing in both Fidelity California and Victory High 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 Victory High 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 Victory High Income, you can compare the effects of market volatilities on Fidelity California and Victory High 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 Victory High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Victory High.

Diversification Opportunities for Fidelity California and Victory High

0.86

Correlation Coefficient

Fidelity California  Victory High

Very poor diversification

The 3 months correlation between Fidelity and Victory is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Victory High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory High Income 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 Victory High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory High Income has no effect on the direction of Fidelity California i.e., Fidelity California and Victory High go up and down completely randomly.

Pair Corralation between Fidelity California and Victory High

Assuming the 90 days horizon Fidelity California is expected to generate 1.28 times less return on investment than Victory High. But when comparing it to its historical volatility, Fidelity California Municipal is 1.43 times less risky than Victory High. It trades about 0.05 of its potential returns per unit of risk. Victory High Income is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  975.00  in Victory High Income on September 12, 2024 and sell it today you would earn a total of  11.00  from holding Victory High Income or generate 1.13% return on investment over 90 days.

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

Fidelity California Municipal  vs.  Victory High Income

Fidelity California

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity California Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Victory High Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Victory High Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Victory High 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 California and Victory High

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

The idea behind Fidelity California Municipal and Victory High 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.