Correlation Between Georgia Tax-free and Fidelity Europe

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

By analyzing existing cross correlation between Georgia Tax Free Bond and Fidelity Europe Fund, you can compare the effects of market volatilities on Georgia Tax-free and Fidelity Europe 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 Georgia Tax-free with a short position of Fidelity Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Georgia Tax-free and Fidelity Europe.

Diversification Opportunities for Georgia Tax-free and Fidelity Europe

0.49

Correlation Coefficient

Georgia Tax-free  Fidelity Europe

Very weak diversification

The 3 months correlation between Georgia and Fidelity is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Tax Free Bond and Fidelity Europe Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe and Georgia Tax-free 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 Georgia Tax Free Bond are associated (or correlated) with Fidelity Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe has no effect on the direction of Georgia Tax-free i.e., Georgia Tax-free and Fidelity Europe go up and down completely randomly.

Pair Corralation between Georgia Tax-free and Fidelity Europe

Assuming the 90 days horizon Georgia Tax-free is expected to generate 21.97 times less return on investment than Fidelity Europe. But when comparing it to its historical volatility, Georgia Tax Free Bond is 3.95 times less risky than Fidelity Europe. It trades about 0.04 of its potential returns per unit of risk. Fidelity Europe Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,462  in Fidelity Europe Fund on December 22, 2024 and sell it today you would earn a total of  456.00  from holding Fidelity Europe Fund or generate 13.17% return on investment over 90 days.

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

Georgia Tax Free Bond  vs.  Fidelity Europe Fund

Georgia Tax Free

Risk-Adjusted Performance

Insignificant

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

Fidelity Europe

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Europe Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Georgia Tax-free and Fidelity Europe

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

The idea behind Georgia Tax Free Bond and Fidelity Europe Fund 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.