Correlation Between Fidelity Low-priced and Vanguard Mid-cap

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

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

Diversification Opportunities for Fidelity Low-priced and Vanguard Mid-cap

0.75

Correlation Coefficient

Fidelity Low-priced  Vanguard Mid-cap

Poor diversification

The 3 months correlation between FIDELITY and Vanguard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Low Priced Stock and Vanguard Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Fidelity Low-priced 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 Low Priced Stock are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Fidelity Low-priced i.e., Fidelity Low-priced and Vanguard Mid-cap go up and down completely randomly.

Pair Corralation between Fidelity Low-priced and Vanguard Mid-cap

Assuming the 90 days horizon Fidelity Low-priced is expected to generate 2.44 times less return on investment than Vanguard Mid-cap. In addition to that, Fidelity Low-priced is 1.21 times more volatile than Vanguard Mid Cap Value. It trades about 0.07 of its total potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about 0.2 per unit of volatility. If you would invest  8,394  in Vanguard Mid Cap Value on August 31, 2024 and sell it today you would earn a total of  718.00  from holding Vanguard Mid Cap Value or generate 8.55% return on investment over 90 days.

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

Fidelity Low Priced Stock  vs.  Vanguard Mid Cap Value

Fidelity Low Priced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Priced Stock are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Low-priced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Mid Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Value are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fidelity Low-priced and Vanguard Mid-cap

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

The idea behind Fidelity Low Priced Stock and Vanguard Mid Cap 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.

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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.