Correlation Between Fidelity Income and Fidelity Municipal

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

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

Diversification Opportunities for Fidelity Income and Fidelity Municipal

0.83

Correlation Coefficient

Fidelity Income  Fidelity Municipal

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Income Replacement and Fidelity Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Municipal Income and Fidelity Income 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 Income Replacement are associated (or correlated) with Fidelity Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Municipal Income has no effect on the direction of Fidelity Income i.e., Fidelity Income and Fidelity Municipal go up and down completely randomly.

Pair Corralation between Fidelity Income and Fidelity Municipal

Assuming the 90 days horizon Fidelity Income Replacement is expected to generate 1.31 times more return on investment than Fidelity Municipal. However, Fidelity Income is 1.31 times more volatile than Fidelity Municipal Income. It trades about 0.07 of its potential returns per unit of risk. Fidelity Municipal Income is currently generating about 0.06 per unit of risk. If you would invest  4,756  in Fidelity Income Replacement on September 26, 2024 and sell it today you would earn a total of  596.00  from holding Fidelity Income Replacement or generate 12.53% return on investment over 90 days.

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

Fidelity Income Replacement  vs.  Fidelity Municipal Income

Fidelity Income Repl

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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.

Pair Trading with Fidelity Income and Fidelity Municipal

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

The idea behind Fidelity Income Replacement and Fidelity Municipal Income 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.