Correlation Between Fidelity California and Touchstone Flexible

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

Diversification Opportunities for Fidelity California and Touchstone Flexible

0.78

Correlation Coefficient

Fidelity California  Touchstone Flexible

Poor diversification

The 3 months correlation between Fidelity and Touchstone is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Touchstone Flexible Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Flexible 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 Touchstone Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Flexible has no effect on the direction of Fidelity California i.e., Fidelity California and Touchstone Flexible go up and down completely randomly.

Pair Corralation between Fidelity California and Touchstone Flexible

Assuming the 90 days horizon Fidelity California is expected to generate 3.6 times less return on investment than Touchstone Flexible. In addition to that, Fidelity California is 1.02 times more volatile than Touchstone Flexible Income. It trades about 0.04 of its total potential returns per unit of risk. Touchstone Flexible Income is currently generating about 0.15 per unit of volatility. If you would invest  1,019  in Touchstone Flexible Income on December 23, 2024 and sell it today you would earn a total of  22.00  from holding Touchstone Flexible Income or generate 2.16% 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.  Touchstone Flexible Income

Fidelity California

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity California Municipal are ranked lower than 3 (%) 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.

Touchstone Flexible

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Flexible Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Touchstone Flexible 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 Touchstone Flexible

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

The idea behind Fidelity California Municipal and Touchstone Flexible 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.