Correlation Between Vanguard Windsor and Fidelity Trend

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

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

Diversification Opportunities for Vanguard Windsor and Fidelity Trend

0.9

Correlation Coefficient

Vanguard Windsor  Fidelity Trend

Almost no diversification

The 3 months correlation between Vanguard and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Windsor Fund and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend and Vanguard Windsor 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 Windsor Fund are associated (or correlated) with Fidelity Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of Vanguard Windsor i.e., Vanguard Windsor and Fidelity Trend go up and down completely randomly.

Pair Corralation between Vanguard Windsor and Fidelity Trend

Assuming the 90 days horizon Vanguard Windsor Fund is expected to under-perform the Fidelity Trend. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Windsor Fund is 2.13 times less risky than Fidelity Trend. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Fidelity Trend Fund is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  20,610  in Fidelity Trend Fund on September 17, 2024 and sell it today you would earn a total of  1,201  from holding Fidelity Trend Fund or generate 5.83% return on investment over 90 days.

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

Vanguard Windsor Fund  vs.  Fidelity Trend Fund

Vanguard Windsor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Windsor Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Windsor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Trend

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Trend Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Trend showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Windsor and Fidelity Trend

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

The idea behind Vanguard Windsor Fund and Fidelity Trend 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.