Correlation Between Tax Managed and Fidelity Mega

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

Diversification Opportunities for Tax Managed and Fidelity Mega

0.91

Correlation Coefficient

Tax Managed  Fidelity Mega

Almost no diversification

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

Pair Corralation between Tax Managed and Fidelity Mega

Assuming the 90 days horizon Tax Managed Mid Small is expected to under-perform the Fidelity Mega. In addition to that, Tax Managed is 2.27 times more volatile than Fidelity Mega Cap. It trades about -0.08 of its total potential returns per unit of risk. Fidelity Mega Cap is currently generating about -0.01 per unit of volatility. If you would invest  2,640  in Fidelity Mega Cap on September 12, 2024 and sell it today you would lose (3.00) from holding Fidelity Mega Cap or give up 0.11% of portfolio value over 90 days.

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

Tax Managed Mid Small  vs.  Fidelity Mega Cap

Tax Managed Mid

Risk-Adjusted Performance

11 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Mid Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tax Managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Mega Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Mega Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Fidelity Mega may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tax Managed and Fidelity Mega

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

The idea behind Tax Managed Mid Small and Fidelity Mega Cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.