Correlation Between Fidelity Intermediate and Tax Exempt

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

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

Diversification Opportunities for Fidelity Intermediate and Tax Exempt

0.87

Correlation Coefficient

Fidelity Intermediate  Tax Exempt

Very poor diversification

The 3 months correlation between Fidelity and Tax is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Intermediate Municipa and Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and Fidelity Intermediate 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 Intermediate Municipal are associated (or correlated) with Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of Fidelity Intermediate i.e., Fidelity Intermediate and Tax Exempt go up and down completely randomly.

Pair Corralation between Fidelity Intermediate and Tax Exempt

Assuming the 90 days horizon Fidelity Intermediate is expected to generate 1.84 times less return on investment than Tax Exempt. But when comparing it to its historical volatility, Fidelity Intermediate Municipal is 1.15 times less risky than Tax Exempt. It trades about 0.05 of its potential returns per unit of risk. Tax Exempt Bond is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,246  in Tax Exempt Bond on September 4, 2024 and sell it today you would earn a total of  14.00  from holding Tax Exempt Bond or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Fidelity Intermediate Municipa  vs.  Tax Exempt Bond

Fidelity Intermediate

Risk-Adjusted Performance

3 of 100

Insignificant

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

Tax Exempt Bond

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Exempt Bond are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Tax Exempt 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 Intermediate and Tax Exempt

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

The idea behind Fidelity Intermediate Municipal and Tax Exempt Bond 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.