Correlation Between Fidelity Gnma and Fidelity Tax

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

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

Diversification Opportunities for Fidelity Gnma and Fidelity Tax

0.71

Correlation Coefficient

Fidelity Gnma  Fidelity Tax

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Gnma Fund 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 Gnma 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 Gnma Fund are associated (or correlated) with Fidelity Tax. 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 Gnma i.e., Fidelity Gnma and Fidelity Tax go up and down completely randomly.

Pair Corralation between Fidelity Gnma and Fidelity Tax

Assuming the 90 days horizon Fidelity Gnma is expected to generate 1.47 times less return on investment than Fidelity Tax. In addition to that, Fidelity Gnma is 1.81 times more volatile than Fidelity Tax Free Bond. It trades about 0.02 of its total potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about 0.06 per unit of volatility. If you would invest  1,013  in Fidelity Tax Free Bond on September 26, 2024 and sell it today you would earn a total of  78.00  from holding Fidelity Tax Free Bond or generate 7.7% return on investment over 90 days.

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

Fidelity Gnma Fund  vs.  Fidelity Tax Free Bond

Fidelity Gnma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Gnma Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Gnma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Fidelity Tax 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 Gnma and Fidelity Tax

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

The idea behind Fidelity Gnma Fund and Fidelity 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.