Correlation Between Fidelity High and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both Fidelity High 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 High 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 High Dividend and Vanguard FTSE Developed, you can compare the effects of market volatilities on Fidelity High 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 High with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity High and Vanguard FTSE.

Diversification Opportunities for Fidelity High and Vanguard FTSE

0.25

Correlation Coefficient

Fidelity High  Vanguard FTSE

Modest diversification

The 3 months correlation between Fidelity and Vanguard is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity High Dividend 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 High 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 High Dividend 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 High i.e., Fidelity High and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Fidelity High and Vanguard FTSE

Assuming the 90 days trading horizon Fidelity High Dividend is expected to generate 0.77 times more return on investment than Vanguard FTSE. However, Fidelity High Dividend is 1.31 times less risky than Vanguard FTSE. It trades about 0.31 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.06 per unit of risk. If you would invest  3,738  in Fidelity High Dividend on September 5, 2024 and sell it today you would earn a total of  133.00  from holding Fidelity High Dividend or generate 3.56% return on investment over 90 days.

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

Fidelity High Dividend  vs.  Vanguard FTSE Developed

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 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 High and Vanguard FTSE

The main advantage of trading using opposite Fidelity High and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity High 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 High Dividend 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.