Correlation Between Fidelity Pennsylvania and Financial Services

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

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

Diversification Opportunities for Fidelity Pennsylvania and Financial Services

-0.15

Correlation Coefficient

Fidelity Pennsylvania  Financial Services

Good diversification

The 3 months correlation between Fidelity and Financial is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Pennsylvania Municipa and Financial Services Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Fidelity Pennsylvania 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 Pennsylvania Municipal are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Fidelity Pennsylvania i.e., Fidelity Pennsylvania and Financial Services go up and down completely randomly.

Pair Corralation between Fidelity Pennsylvania and Financial Services

Assuming the 90 days horizon Fidelity Pennsylvania is expected to generate 8.44 times less return on investment than Financial Services. But when comparing it to its historical volatility, Fidelity Pennsylvania Municipal is 5.49 times less risky than Financial Services. It trades about 0.1 of its potential returns per unit of risk. Financial Services Portfolio is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,125  in Financial Services Portfolio on September 4, 2024 and sell it today you would earn a total of  524.00  from holding Financial Services Portfolio or generate 46.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Fidelity Pennsylvania Municipa  vs.  Financial Services Portfolio

Fidelity Pennsylvania

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Pennsylvania Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Pennsylvania is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Services Portfolio are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Financial Services showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Pennsylvania and Financial Services

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

The idea behind Fidelity Pennsylvania Municipal and Financial Services Portfolio 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.