Correlation Between Fidelity Convertible and Schwab Tax-free

Can any of the company-specific risk be diversified away by investing in both Fidelity Convertible and Schwab 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 Convertible and Schwab Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Vertible Securities and Schwab Tax Free Bond, you can compare the effects of market volatilities on Fidelity Convertible and Schwab 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 Convertible with a short position of Schwab Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Convertible and Schwab Tax-free.

Diversification Opportunities for Fidelity Convertible and Schwab Tax-free

-0.12

Correlation Coefficient

Fidelity Convertible  Schwab Tax-free

Good diversification

The 3 months correlation between Fidelity and Schwab is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Vertible Securities and Schwab Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Tax Free and Fidelity Convertible 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 Vertible Securities are associated (or correlated) with Schwab 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 Schwab Tax Free has no effect on the direction of Fidelity Convertible i.e., Fidelity Convertible and Schwab Tax-free go up and down completely randomly.

Pair Corralation between Fidelity Convertible and Schwab Tax-free

Assuming the 90 days horizon Fidelity Vertible Securities is expected to under-perform the Schwab Tax-free. In addition to that, Fidelity Convertible is 4.89 times more volatile than Schwab Tax Free Bond. It trades about -0.12 of its total potential returns per unit of risk. Schwab Tax Free Bond is currently generating about 0.06 per unit of volatility. If you would invest  1,079  in Schwab Tax Free Bond on December 21, 2024 and sell it today you would earn a total of  8.00  from holding Schwab Tax Free Bond or generate 0.74% return on investment over 90 days.

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

Fidelity Vertible Securities  vs.  Schwab Tax Free Bond

Fidelity Convertible

Risk-Adjusted Performance

Very Weak

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

Schwab Tax Free

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Tax Free Bond are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Tax-free 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 Convertible and Schwab Tax-free

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

The idea behind Fidelity Vertible Securities and Schwab Tax Free Bond 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.