Correlation Between Fidelity Canadian and Vanguard FTSE

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

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

Diversification Opportunities for Fidelity Canadian and Vanguard FTSE

0.26

Correlation Coefficient

Fidelity Canadian  Vanguard FTSE

Modest diversification

The 3 months correlation between Fidelity and Vanguard is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Canadian High and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Fidelity Canadian 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 Canadian High are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Fidelity Canadian i.e., Fidelity Canadian and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Fidelity Canadian and Vanguard FTSE

Assuming the 90 days trading horizon Fidelity Canadian High is expected to generate 0.72 times more return on investment than Vanguard FTSE. However, Fidelity Canadian High is 1.39 times less risky than Vanguard FTSE. It trades about 0.27 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.07 per unit of risk. If you would invest  2,875  in Fidelity Canadian High on September 5, 2024 and sell it today you would earn a total of  229.00  from holding Fidelity Canadian High or generate 7.97% return on investment over 90 days.

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

Fidelity Canadian High  vs.  Vanguard FTSE Developed

Fidelity Canadian High

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian High are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard FTSE Developed

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Canadian and Vanguard FTSE

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

The idea behind Fidelity Canadian High and Vanguard FTSE Developed 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..