Correlation Between Fidelity Managed and Fidelity Tax

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

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

Diversification Opportunities for Fidelity Managed and Fidelity Tax

0.74

Correlation Coefficient

Fidelity Managed  Fidelity Tax

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Managed Retirement and Fidelity Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Tax Free and Fidelity 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 Fidelity Managed Retirement are associated (or correlated) with Fidelity Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Tax Free has no effect on the direction of Fidelity Managed i.e., Fidelity Managed and Fidelity Tax go up and down completely randomly.

Pair Corralation between Fidelity Managed and Fidelity Tax

Assuming the 90 days horizon Fidelity Managed is expected to generate 3.3 times less return on investment than Fidelity Tax. But when comparing it to its historical volatility, Fidelity Managed Retirement is 1.01 times less risky than Fidelity Tax. It trades about 0.01 of its potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,108  in Fidelity Tax Free Bond on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Fidelity Tax Free Bond or generate 0.54% return on investment over 90 days.

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

Fidelity Managed Retirement  vs.  Fidelity Tax Free Bond

Fidelity Managed Ret

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Managed Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Fidelity Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Tax Free

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Tax Free Bond are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Fidelity Tax 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 Managed and Fidelity Tax

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

The idea behind Fidelity Managed Retirement and Fidelity Tax Free 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 Stocks Directory module to find actively traded stocks across global markets.