Correlation Between Fidelity California and Moderately Aggressive

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

Diversification Opportunities for Fidelity California and Moderately Aggressive

0.68

Correlation Coefficient

Fidelity California  Moderately Aggressive

Poor diversification

The 3 months correlation between Fidelity and Moderately is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Fidelity California i.e., Fidelity California and Moderately Aggressive go up and down completely randomly.

Pair Corralation between Fidelity California and Moderately Aggressive

Assuming the 90 days horizon Fidelity California is expected to generate 4.08 times less return on investment than Moderately Aggressive. But when comparing it to its historical volatility, Fidelity California Municipal is 2.29 times less risky than Moderately Aggressive. It trades about 0.02 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,197  in Moderately Aggressive Balanced on October 24, 2024 and sell it today you would earn a total of  20.00  from holding Moderately Aggressive Balanced or generate 1.67% return on investment over 90 days.

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

Fidelity California Municipal  vs.  Moderately Aggressive Balanced

Fidelity California

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity California Municipal are ranked lower than 1 (%) 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.

Moderately Aggressive

Risk-Adjusted Performance

3 of 100

Weak

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

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

The idea behind Fidelity California Municipal and Moderately Aggressive Balanced 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.