Correlation Between Fidelity California and Schwab Markettrack

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

Diversification Opportunities for Fidelity California and Schwab Markettrack

0.49

Correlation Coefficient

Fidelity California  Schwab Markettrack

Very weak diversification

The 3 months correlation between Fidelity and Schwab is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Schwab Markettrack Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Markettrack 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 Schwab Markettrack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Markettrack has no effect on the direction of Fidelity California i.e., Fidelity California and Schwab Markettrack go up and down completely randomly.

Pair Corralation between Fidelity California and Schwab Markettrack

Assuming the 90 days horizon Fidelity California is expected to generate 2.32 times less return on investment than Schwab Markettrack. But when comparing it to its historical volatility, Fidelity California Municipal is 3.1 times less risky than Schwab Markettrack. It trades about 0.03 of its potential returns per unit of risk. Schwab Markettrack Balanced is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,823  in Schwab Markettrack Balanced on October 26, 2024 and sell it today you would earn a total of  73.00  from holding Schwab Markettrack Balanced or generate 4.0% return on investment over 90 days.

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

Fidelity California Municipal  vs.  Schwab Markettrack Balanced

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.

Schwab Markettrack

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Markettrack Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fidelity California and Schwab Markettrack

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

The idea behind Fidelity California Municipal and Schwab Markettrack 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.