Correlation Between Fidelity New and Vanguard Equity

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

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

Diversification Opportunities for Fidelity New and Vanguard Equity

0.95

Correlation Coefficient

Fidelity New  Vanguard Equity

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 New Millennium and Vanguard Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Equity Income and Fidelity New 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 New Millennium are associated (or correlated) with Vanguard Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Equity Income has no effect on the direction of Fidelity New i.e., Fidelity New and Vanguard Equity go up and down completely randomly.

Pair Corralation between Fidelity New and Vanguard Equity

Assuming the 90 days horizon Fidelity New Millennium is expected to generate 1.16 times more return on investment than Vanguard Equity. However, Fidelity New is 1.16 times more volatile than Vanguard Equity Income. It trades about 0.3 of its potential returns per unit of risk. Vanguard Equity Income is currently generating about 0.18 per unit of risk. If you would invest  5,586  in Fidelity New Millennium on September 7, 2024 and sell it today you would earn a total of  792.00  from holding Fidelity New Millennium or generate 14.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Fidelity New Millennium  vs.  Vanguard Equity Income

Fidelity New Millennium

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity New Millennium are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Fidelity New showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Equity Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Equity Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity New and Vanguard Equity

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

The idea behind Fidelity New Millennium and Vanguard Equity Income 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.