Correlation Between Fidelity California and Fidelity Tax-free
Can any of the company-specific risk be diversified away by investing in both Fidelity California and Fidelity Tax-free 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 Fidelity Tax-free 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 Fidelity Tax Free Bond, you can compare the effects of market volatilities on Fidelity California and Fidelity Tax-free 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 Fidelity Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Fidelity Tax-free.
Diversification Opportunities for Fidelity California and Fidelity Tax-free
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Fidelity Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Tax Free 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 Fidelity Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Tax Free has no effect on the direction of Fidelity California i.e., Fidelity California and Fidelity Tax-free go up and down completely randomly.
Pair Corralation between Fidelity California and Fidelity Tax-free
Assuming the 90 days horizon Fidelity California Municipal is expected to generate 1.02 times more return on investment than Fidelity Tax-free. However, Fidelity California is 1.02 times more volatile than Fidelity Tax Free Bond. It trades about 0.06 of its potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about 0.06 per unit of risk. If you would invest 1,228 in Fidelity California Municipal on September 6, 2024 and sell it today you would earn a total of 13.00 from holding Fidelity California Municipal or generate 1.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Fidelity California Municipal vs. Fidelity Tax Free Bond
Performance |
Timeline |
Fidelity California |
Fidelity Tax Free |
Fidelity California and Fidelity Tax-free Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fidelity California and Fidelity Tax-free
The main advantage of trading using opposite Fidelity California and Fidelity Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity California position performs unexpectedly, Fidelity Tax-free 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 Fidelity Tax-free will offset losses from the drop in Fidelity Tax-free's long position.Fidelity California vs. Fidelity California Limited | Fidelity California vs. Fidelity Municipal Income | Fidelity California vs. Fidelity Tax Free Bond | Fidelity California vs. Fidelity Limited Term |
Fidelity Tax-free vs. Prudential Government Money | Fidelity Tax-free vs. First American Funds | Fidelity Tax-free vs. Wt Mutual Fund | Fidelity Tax-free vs. Rbc Funds Trust |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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