Correlation Between Vanguard Dividend and Fidelity High

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

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

Diversification Opportunities for Vanguard Dividend and Fidelity High

0.83

Correlation Coefficient

Vanguard Dividend  Fidelity High

Very poor diversification

The 3 months correlation between Vanguard and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and Fidelity High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Dividend and Vanguard Dividend 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 Dividend Appreciation are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Dividend has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and Fidelity High go up and down completely randomly.

Pair Corralation between Vanguard Dividend and Fidelity High

Assuming the 90 days trading horizon Vanguard Dividend Appreciation is expected to generate 1.45 times more return on investment than Fidelity High. However, Vanguard Dividend is 1.45 times more volatile than Fidelity High Dividend. It trades about 0.2 of its potential returns per unit of risk. Fidelity High Dividend is currently generating about 0.23 per unit of risk. If you would invest  6,422  in Vanguard Dividend Appreciation on August 31, 2024 and sell it today you would earn a total of  238.00  from holding Vanguard Dividend Appreciation or generate 3.71% return on investment over 90 days.

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

Vanguard Dividend Appreciation  vs.  Fidelity High Dividend

Vanguard Dividend

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Dividend Appreciation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity High Dividend

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity High Dividend are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity High may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Dividend and Fidelity High

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

The idea behind Vanguard Dividend Appreciation and Fidelity High Dividend 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.