Correlation Between Fidelity Small and Vanguard Selected

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

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

Diversification Opportunities for Fidelity Small and Vanguard Selected

0.95

Correlation Coefficient

Fidelity Small  Vanguard Selected

Almost no diversification

The 3 months correlation between Fidelity and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Cap and Vanguard Selected Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Selected Value and Fidelity Small 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 Small Cap are associated (or correlated) with Vanguard Selected. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Selected Value has no effect on the direction of Fidelity Small i.e., Fidelity Small and Vanguard Selected go up and down completely randomly.

Pair Corralation between Fidelity Small and Vanguard Selected

Assuming the 90 days horizon Fidelity Small Cap is expected to generate 1.45 times more return on investment than Vanguard Selected. However, Fidelity Small is 1.45 times more volatile than Vanguard Selected Value. It trades about 0.15 of its potential returns per unit of risk. Vanguard Selected Value is currently generating about 0.09 per unit of risk. If you would invest  2,666  in Fidelity Small Cap on September 13, 2024 and sell it today you would earn a total of  317.00  from holding Fidelity Small Cap or generate 11.89% return on investment over 90 days.

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

Fidelity Small Cap  vs.  Vanguard Selected Value

Fidelity Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Selected Value

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Selected Value are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Selected is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Small and Vanguard Selected

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

The idea behind Fidelity Small Cap and Vanguard Selected Value 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.

Check out your portfolio center.

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..