Correlation Between Fidelity Arizona and Fidelity Michigan

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

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

Diversification Opportunities for Fidelity Arizona and Fidelity Michigan

0.91

Correlation Coefficient

Fidelity Arizona  Fidelity Michigan

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Arizona Municipal and Fidelity Michigan Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Michigan and Fidelity Arizona 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 Arizona Municipal are associated (or correlated) with Fidelity Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Michigan has no effect on the direction of Fidelity Arizona i.e., Fidelity Arizona and Fidelity Michigan go up and down completely randomly.

Pair Corralation between Fidelity Arizona and Fidelity Michigan

Assuming the 90 days horizon Fidelity Arizona Municipal is expected to generate 0.9 times more return on investment than Fidelity Michigan. However, Fidelity Arizona Municipal is 1.11 times less risky than Fidelity Michigan. It trades about -0.03 of its potential returns per unit of risk. Fidelity Michigan Municipal is currently generating about -0.06 per unit of risk. If you would invest  1,136  in Fidelity Arizona Municipal on December 28, 2024 and sell it today you would lose (4.00) from holding Fidelity Arizona Municipal or give up 0.35% of portfolio value over 90 days.

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

Fidelity Arizona Municipal  vs.  Fidelity Michigan Municipal

Fidelity Arizona Mun

Risk-Adjusted Performance

Very Weak

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

Fidelity Michigan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Michigan Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Michigan 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 Arizona and Fidelity Michigan

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

The idea behind Fidelity Arizona Municipal and Fidelity Michigan Municipal 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.