Correlation Between Fidelity Municipal and Sprott Gold

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

Diversification Opportunities for Fidelity Municipal and Sprott Gold

-0.29

Correlation Coefficient

Fidelity Municipal  Sprott Gold

Very good diversification

The 3 months correlation between Fidelity and Sprott is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and Sprott Gold Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Gold Equity 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 Sprott Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Gold Equity has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and Sprott Gold go up and down completely randomly.

Pair Corralation between Fidelity Municipal and Sprott Gold

Assuming the 90 days horizon Fidelity Municipal Income is expected to generate 0.13 times more return on investment than Sprott Gold. However, Fidelity Municipal Income is 7.51 times less risky than Sprott Gold. It trades about -0.07 of its potential returns per unit of risk. Sprott Gold Equity is currently generating about -0.07 per unit of risk. If you would invest  1,227  in Fidelity Municipal Income on September 20, 2024 and sell it today you would lose (4.00) from holding Fidelity Municipal Income or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Fidelity Municipal Income  vs.  Sprott Gold Equity

Fidelity Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sprott Gold Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Gold Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Sprott Gold 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 Municipal and Sprott Gold

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

The idea behind Fidelity Municipal Income and Sprott Gold Equity 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.