Correlation Between Vanguard Total and Fidelity Japan

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

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

Diversification Opportunities for Vanguard Total and Fidelity Japan

0.83

Correlation Coefficient

Vanguard Total  Fidelity Japan

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 Total International and Fidelity Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Japan and Vanguard Total 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 Total International are associated (or correlated) with Fidelity Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Japan has no effect on the direction of Vanguard Total i.e., Vanguard Total and Fidelity Japan go up and down completely randomly.

Pair Corralation between Vanguard Total and Fidelity Japan

Assuming the 90 days horizon Vanguard Total is expected to generate 1.1 times less return on investment than Fidelity Japan. But when comparing it to its historical volatility, Vanguard Total International is 1.42 times less risky than Fidelity Japan. It trades about 0.06 of its potential returns per unit of risk. Fidelity Japan Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,425  in Fidelity Japan Fund on August 31, 2024 and sell it today you would earn a total of  328.00  from holding Fidelity Japan Fund or generate 23.02% return on investment over 90 days.

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

Vanguard Total International  vs.  Fidelity Japan Fund

Vanguard Total Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Japan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Total and Fidelity Japan

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

The idea behind Vanguard Total International and Fidelity Japan 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.