Correlation Between Fidelity Pennsylvania and Materials Portfolio

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

Diversification Opportunities for Fidelity Pennsylvania and Materials Portfolio

0.4

Correlation Coefficient

Fidelity Pennsylvania  Materials Portfolio

Very weak diversification

The 3 months correlation between Fidelity and Materials is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Pennsylvania Municipa and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio 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 Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Fidelity Pennsylvania i.e., Fidelity Pennsylvania and Materials Portfolio go up and down completely randomly.

Pair Corralation between Fidelity Pennsylvania and Materials Portfolio

Assuming the 90 days horizon Fidelity Pennsylvania Municipal is expected to generate 0.19 times more return on investment than Materials Portfolio. However, Fidelity Pennsylvania Municipal is 5.23 times less risky than Materials Portfolio. It trades about -0.12 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about -0.22 per unit of risk. If you would invest  1,064  in Fidelity Pennsylvania Municipal on October 1, 2024 and sell it today you would lose (19.00) from holding Fidelity Pennsylvania Municipal or give up 1.79% of portfolio value over 90 days.

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

Fidelity Pennsylvania Municipa  vs.  Materials Portfolio Fidelity

Fidelity Pennsylvania

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Pennsylvania Municipal has generated negative risk-adjusted returns adding no value to fund investors. 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.

Materials Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fidelity Pennsylvania and Materials Portfolio

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

The idea behind Fidelity Pennsylvania Municipal and Materials Portfolio Fidelity 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.