Correlation Between Tax Managed and Fisher Investments

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

Diversification Opportunities for Tax Managed and Fisher Investments

0.96

Correlation Coefficient

Tax Managed  Fisher Investments

Almost no diversification

The 3 months correlation between Tax and Fisher is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Fisher Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fisher Investments 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 Fisher Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fisher Investments has no effect on the direction of Tax Managed i.e., Tax Managed and Fisher Investments go up and down completely randomly.

Pair Corralation between Tax Managed and Fisher Investments

Assuming the 90 days horizon Tax Managed Mid Small is expected to under-perform the Fisher Investments. But the mutual fund apears to be less risky and, when comparing its historical volatility, Tax Managed Mid Small is 1.04 times less risky than Fisher Investments. The mutual fund trades about -0.27 of its potential returns per unit of risk. The Fisher Small Cap is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  1,327  in Fisher Small Cap on October 9, 2024 and sell it today you would lose (69.00) from holding Fisher Small Cap or give up 5.2% 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.  Fisher Small Cap

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

Fisher Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fisher Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fisher Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax Managed and Fisher Investments

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

The idea behind Tax Managed Mid Small and Fisher Small 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.