Correlation Between Fidelity Municipal and State Street
Can any of the company-specific risk be diversified away by investing in both Fidelity Municipal and State Street 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 Municipal and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Municipal Income and State Street Smallmid, you can compare the effects of market volatilities on Fidelity Municipal and State Street 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 Municipal with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Municipal and State Street.
Diversification Opportunities for Fidelity Municipal and State Street
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and State is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid and Fidelity Municipal 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 Municipal Income are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and State Street go up and down completely randomly.
Pair Corralation between Fidelity Municipal and State Street
Assuming the 90 days horizon Fidelity Municipal Income is expected to generate 0.06 times more return on investment than State Street. However, Fidelity Municipal Income is 16.89 times less risky than State Street. It trades about 0.2 of its potential returns per unit of risk. State Street Smallmid is currently generating about -0.24 per unit of risk. If you would invest 997.00 in Fidelity Municipal Income on September 27, 2024 and sell it today you would earn a total of 3.00 from holding Fidelity Municipal Income or generate 0.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Fidelity Municipal Income vs. State Street Smallmid
Performance |
Timeline |
Fidelity Municipal Income |
State Street Smallmid |
Fidelity Municipal and State Street Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fidelity Municipal and State Street
The main advantage of trading using opposite Fidelity Municipal and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Municipal position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.Fidelity Municipal vs. Fidelity Freedom 2015 | Fidelity Municipal vs. Fidelity Puritan Fund | Fidelity Municipal vs. Fidelity Puritan Fund | Fidelity Municipal vs. Fidelity Pennsylvania Municipal |
State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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