Correlation Between Fidelity Advisor and Vanguard Extended

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

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

Diversification Opportunities for Fidelity Advisor and Vanguard Extended

0.91

Correlation Coefficient

Fidelity Advisor  Vanguard Extended

Almost no diversification

The 3 months correlation between Fidelity and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Growth and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Fidelity Advisor 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 Advisor Growth are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Vanguard Extended go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Vanguard Extended

Assuming the 90 days horizon Fidelity Advisor Growth is expected to generate 1.06 times more return on investment than Vanguard Extended. However, Fidelity Advisor is 1.06 times more volatile than Vanguard Extended Market. It trades about 0.12 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.07 per unit of risk. If you would invest  8,590  in Fidelity Advisor Growth on September 21, 2024 and sell it today you would earn a total of  8,933  from holding Fidelity Advisor Growth or generate 103.99% return on investment over 90 days.

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

Fidelity Advisor Growth  vs.  Vanguard Extended Market

Fidelity Advisor Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Extended Market

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Vanguard Extended 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 Advisor and Vanguard Extended

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

The idea behind Fidelity Advisor Growth and Vanguard Extended Market 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.