Correlation Between Vanguard FTSE and Fidelity Hedged

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

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

Diversification Opportunities for Vanguard FTSE and Fidelity Hedged

-0.48

Correlation Coefficient

Vanguard FTSE  Fidelity Hedged

Very good diversification

The 3 months correlation between Vanguard and Fidelity is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Fidelity Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Hedged Equity and Vanguard FTSE 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 Vanguard FTSE Developed are associated (or correlated) with Fidelity Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Hedged Equity has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Fidelity Hedged go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Fidelity Hedged

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the Fidelity Hedged. In addition to that, Vanguard FTSE is 1.32 times more volatile than Fidelity Hedged Equity. It trades about -0.09 of its total potential returns per unit of risk. Fidelity Hedged Equity is currently generating about 0.12 per unit of volatility. If you would invest  2,666  in Fidelity Hedged Equity on August 30, 2024 and sell it today you would earn a total of  129.00  from holding Fidelity Hedged Equity or generate 4.84% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Fidelity Hedged Equity

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Hedged Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Hedged Equity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Fidelity Hedged is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard FTSE and Fidelity Hedged

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

The idea behind Vanguard FTSE Developed and Fidelity Hedged Equity 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.