Correlation Between Vanguard FTSE and Fidelity Low

Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Fidelity Low 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 Low 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 Low Duration, you can compare the effects of market volatilities on Vanguard FTSE and Fidelity Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Fidelity Low.

Diversification Opportunities for Vanguard FTSE and Fidelity Low

-0.54

Correlation Coefficient

Vanguard FTSE  Fidelity Low

Excellent diversification

The 3 months correlation between Vanguard and Fidelity is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Fidelity Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Duration 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Duration has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Fidelity Low go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Fidelity Low

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the Fidelity Low. In addition to that, Vanguard FTSE is 8.66 times more volatile than Fidelity Low Duration. It trades about -0.03 of its total potential returns per unit of risk. Fidelity Low Duration is currently generating about 0.18 per unit of volatility. If you would invest  4,959  in Fidelity Low Duration on September 4, 2024 and sell it today you would earn a total of  52.00  from holding Fidelity Low Duration or generate 1.05% 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 Low Duration

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 Low Duration

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Duration are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Fidelity Low is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard FTSE and Fidelity Low

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

The idea behind Vanguard FTSE Developed and Fidelity Low Duration 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.