Correlation Between Fidelity Municipal and Frost Kempner

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

Diversification Opportunities for Fidelity Municipal and Frost Kempner

0.27

Correlation Coefficient

Fidelity Municipal  Frost Kempner

Modest diversification

The 3 months correlation between Fidelity and Frost is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and Frost Kempner Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Kempner Treasury 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 Frost Kempner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Kempner Treasury has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and Frost Kempner go up and down completely randomly.

Pair Corralation between Fidelity Municipal and Frost Kempner

Assuming the 90 days horizon Fidelity Municipal Income is expected to under-perform the Frost Kempner. In addition to that, Fidelity Municipal is 2.11 times more volatile than Frost Kempner Treasury. It trades about -0.03 of its total potential returns per unit of risk. Frost Kempner Treasury is currently generating about 0.2 per unit of volatility. If you would invest  837.00  in Frost Kempner Treasury on December 5, 2024 and sell it today you would earn a total of  12.00  from holding Frost Kempner Treasury or generate 1.43% return on investment over 90 days.

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

Fidelity Municipal Income  vs.  Frost Kempner Treasury

Fidelity Municipal Income

Risk-Adjusted Performance

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 technical and fundamental indicators, Fidelity Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Frost Kempner Treasury

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Kempner Treasury are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Frost Kempner 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 Frost Kempner

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

The idea behind Fidelity Municipal Income and Frost Kempner Treasury 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.