Correlation Between Fidelity Advisor and Vanguard Information

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

By analyzing existing cross correlation between Fidelity Advisor Semiconductors and Vanguard Information Technology, you can compare the effects of market volatilities on Fidelity Advisor and Vanguard Information 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 Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advisor and Vanguard Information.

Diversification Opportunities for Fidelity Advisor and Vanguard Information

0.79

Correlation Coefficient

Fidelity Advisor  Vanguard Information

Poor diversification

The 3 months correlation between Fidelity and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advisor Semiconductor and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information 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 Semiconductors are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of Fidelity Advisor i.e., Fidelity Advisor and Vanguard Information go up and down completely randomly.

Pair Corralation between Fidelity Advisor and Vanguard Information

Assuming the 90 days horizon Fidelity Advisor Semiconductors is expected to under-perform the Vanguard Information. In addition to that, Fidelity Advisor is 1.8 times more volatile than Vanguard Information Technology. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Information Technology is currently generating about -0.04 per unit of volatility. If you would invest  32,140  in Vanguard Information Technology on December 1, 2024 and sell it today you would lose (1,516) from holding Vanguard Information Technology or give up 4.72% of portfolio value over 90 days.

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

Fidelity Advisor Semiconductor  vs.  Vanguard Information Technolog

Fidelity Advisor Sem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advisor Semiconductors has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Information Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Information 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 Advisor and Vanguard Information

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

The idea behind Fidelity Advisor Semiconductors and Vanguard Information Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.