Correlation Between Fidelity California and Large Capitalization

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

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

Diversification Opportunities for Fidelity California and Large Capitalization

0.6

Correlation Coefficient

Fidelity California  Large Capitalization

Poor diversification

The 3 months correlation between Fidelity and Large is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Large Capitalization Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Capitalization and Fidelity California 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 California Municipal are associated (or correlated) with Large Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Capitalization has no effect on the direction of Fidelity California i.e., Fidelity California and Large Capitalization go up and down completely randomly.

Pair Corralation between Fidelity California and Large Capitalization

Assuming the 90 days horizon Fidelity California Municipal is expected to under-perform the Large Capitalization. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity California Municipal is 6.5 times less risky than Large Capitalization. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Large Capitalization Growth is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  484.00  in Large Capitalization Growth on April 30, 2025 and sell it today you would earn a total of  97.00  from holding Large Capitalization Growth or generate 20.04% return on investment over 90 days.

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

Fidelity California Municipal  vs.  Large Capitalization Growth

Fidelity California

Risk-Adjusted Performance

Very Weak

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

Large Capitalization

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Large Capitalization Growth are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Large Capitalization showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity California and Large Capitalization

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

The idea behind Fidelity California Municipal and Large Capitalization Growth 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.