Correlation Between Tax-managed and Fidelity Series

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

By analyzing existing cross correlation between Tax Managed Mid Small and Fidelity Series Large, you can compare the effects of market volatilities on Tax-managed and Fidelity Series 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 Tax-managed with a short position of Fidelity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Fidelity Series.

Diversification Opportunities for Tax-managed and Fidelity Series

0.36

Correlation Coefficient

Tax-managed  Fidelity Series

Weak diversification

The 3 months correlation between Tax-managed and Fidelity is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Fidelity Series Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series Large and Tax-managed 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 Tax Managed Mid Small are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series Large has no effect on the direction of Tax-managed i.e., Tax-managed and Fidelity Series go up and down completely randomly.

Pair Corralation between Tax-managed and Fidelity Series

Assuming the 90 days horizon Tax Managed Mid Small is expected to under-perform the Fidelity Series. In addition to that, Tax-managed is 1.03 times more volatile than Fidelity Series Large. It trades about -0.27 of its total potential returns per unit of risk. Fidelity Series Large is currently generating about -0.02 per unit of volatility. If you would invest  2,591  in Fidelity Series Large on October 8, 2024 and sell it today you would lose (14.00) from holding Fidelity Series Large or give up 0.54% of portfolio value over 90 days.

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

Tax Managed Mid Small  vs.  Fidelity Series Large

Tax Managed Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Series Large

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Large are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Series may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tax-managed and Fidelity Series

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

The idea behind Tax Managed Mid Small and Fidelity Series Large 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.