Correlation Between Fidelity Puritan and Fidelity Tax

Can any of the company-specific risk be diversified away by investing in both Fidelity Puritan 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 Puritan 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 Puritan Fund and Fidelity Tax Free Bond, you can compare the effects of market volatilities on Fidelity Puritan 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 Puritan with a short position of Fidelity Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Puritan and Fidelity Tax.

Diversification Opportunities for Fidelity Puritan and Fidelity Tax

0.24

Correlation Coefficient

Fidelity Puritan  Fidelity Tax

Modest diversification

The 3 months correlation between Fidelity and Fidelity is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Puritan 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 Puritan 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 Puritan 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 Puritan i.e., Fidelity Puritan and Fidelity Tax go up and down completely randomly.

Pair Corralation between Fidelity Puritan and Fidelity Tax

Assuming the 90 days horizon Fidelity Puritan Fund is expected to generate 2.21 times more return on investment than Fidelity Tax. However, Fidelity Puritan is 2.21 times more volatile than Fidelity Tax Free Bond. It trades about 0.04 of its potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about -0.03 per unit of risk. If you would invest  2,505  in Fidelity Puritan Fund on September 26, 2024 and sell it today you would earn a total of  24.00  from holding Fidelity Puritan Fund or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Fidelity Puritan Fund  vs.  Fidelity Tax Free Bond

Fidelity Puritan

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Puritan Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Puritan 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 Puritan and Fidelity Tax

The main advantage of trading using opposite Fidelity Puritan and Fidelity Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Puritan 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 Puritan 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.