Correlation Between Fidelity Low and Vanguard Mid

Can any of the company-specific risk be diversified away by investing in both Fidelity Low and Vanguard Mid 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 and Vanguard Mid 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 and Vanguard Mid 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 with a short position of Vanguard Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Low and Vanguard Mid.

Diversification Opportunities for Fidelity Low and Vanguard Mid

0.92

Correlation Coefficient

Fidelity Low  Vanguard Mid

Almost no diversification

The 3 months correlation between Fidelity and Vanguard is 0.92. 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 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. 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 i.e., Fidelity Low and Vanguard Mid go up and down completely randomly.

Pair Corralation between Fidelity Low and Vanguard Mid

Assuming the 90 days horizon Fidelity Low Priced Stock is expected to generate 1.01 times more return on investment than Vanguard Mid. However, Fidelity Low is 1.01 times more volatile than Vanguard Mid Cap Value. It trades about -0.01 of its potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about -0.02 per unit of risk. If you would invest  4,051  in Fidelity Low Priced Stock on December 30, 2024 and sell it today you would lose (26.00) from holding Fidelity Low Priced Stock or give up 0.64% of portfolio value over 90 days.

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

Fidelity Low Priced Stock  vs.  Vanguard Mid Cap Value

Fidelity Low Priced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Low Priced Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Low 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

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Mid 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 Low and Vanguard Mid

The main advantage of trading using opposite Fidelity Low and Vanguard Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Low position performs unexpectedly, Vanguard Mid 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 will offset losses from the drop in Vanguard Mid'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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.