Correlation Between Fidelity Low and Vanguard Explorer

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

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

Diversification Opportunities for Fidelity Low and Vanguard Explorer

0.46

Correlation Coefficient

Fidelity Low  Vanguard Explorer

Very weak diversification

The 3 months correlation between Fidelity and Vanguard is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Low Priced Stock and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and Fidelity Low 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 Low Priced Stock are associated (or correlated) with Vanguard Explorer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Explorer has no effect on the direction of Fidelity Low i.e., Fidelity Low and Vanguard Explorer go up and down completely randomly.

Pair Corralation between Fidelity Low and Vanguard Explorer

Assuming the 90 days horizon Fidelity Low is expected to generate 1.7 times less return on investment than Vanguard Explorer. But when comparing it to its historical volatility, Fidelity Low Priced Stock is 1.34 times less risky than Vanguard Explorer. It trades about 0.05 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,563  in Vanguard Explorer Fund on September 14, 2024 and sell it today you would earn a total of  3,347  from holding Vanguard Explorer Fund or generate 39.09% return on investment over 90 days.

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

Fidelity Low Priced Stock  vs.  Vanguard Explorer Fund

Fidelity Low Priced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Explorer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Explorer Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Explorer 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 Low and Vanguard Explorer

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

The idea behind Fidelity Low Priced Stock and Vanguard Explorer Fund 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.