Correlation Between Fidelity Advisor and Vanguard Federal

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Can any of the company-specific risk be diversified away by investing in both Fidelity Advisor and Vanguard Federal 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 Fidelity Advisor and Vanguard Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Advisor Growth and Vanguard Federal Money, you can compare the effects of market volatilities on Fidelity Advisor and Vanguard Federal 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 Fidelity Advisor with a short position of Vanguard Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Vanguard Federal.

Diversification Opportunities for Fidelity Advisor and Vanguard Federal

FidelityVanguardDiversified AwayFidelityVanguardDiversified Away100%
0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fidelity and Vanguard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Growth and Vanguard Federal Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Federal Money and Fidelity Advisor 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 Fidelity Advisor Growth are associated (or correlated) with Vanguard Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Federal Money has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Vanguard Federal go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Vanguard Federal

Assuming the 90 days horizon Fidelity Advisor Growth is expected to generate 8.12 times more return on investment than Vanguard Federal. However, Fidelity Advisor is 8.12 times more volatile than Vanguard Federal Money. It trades about 0.23 of its potential returns per unit of risk. Vanguard Federal Money is currently generating about 0.12 per unit of risk. If you would invest  15,690  in Fidelity Advisor Growth on September 15, 2024 and sell it today you would earn a total of  2,420  from holding Fidelity Advisor Growth or generate 15.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

Fidelity Advisor Growth  vs.  Vanguard Federal Money

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 51015
JavaScript chart by amCharts 3.21.15FAGOX VMFXX
       Timeline  
Fidelity Advisor Growth 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Growth 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 Advisor showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec165170175180
Vanguard Federal Money 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Federal Money are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.990.9920.9940.9960.9981

Fidelity Advisor and Vanguard Federal Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.02-2.26-1.5-0.750.00.841.692.543.39 510152025
JavaScript chart by amCharts 3.21.15FAGOX VMFXX
       Returns  

Pair Trading with Fidelity Advisor and Vanguard Federal

The main advantage of trading using opposite Fidelity Advisor and Vanguard Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Advisor position performs unexpectedly, Vanguard Federal 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 Vanguard Federal will offset losses from the drop in Vanguard Federal's long position.
The idea behind Fidelity Advisor Growth and Vanguard Federal Money 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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