Correlation Between Fidelity Nordic and Vanguard Pacific

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

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

Diversification Opportunities for Fidelity Nordic and Vanguard Pacific

0.76

Correlation Coefficient

Fidelity Nordic  Vanguard Pacific

Poor diversification

The 3 months correlation between Fidelity and Vanguard is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Nordic Fund and Vanguard Pacific Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Pacific Stock and Fidelity Nordic 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 Nordic Fund are associated (or correlated) with Vanguard Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Pacific Stock has no effect on the direction of Fidelity Nordic i.e., Fidelity Nordic and Vanguard Pacific go up and down completely randomly.

Pair Corralation between Fidelity Nordic and Vanguard Pacific

Assuming the 90 days horizon Fidelity Nordic Fund is expected to under-perform the Vanguard Pacific. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Nordic Fund is 1.1 times less risky than Vanguard Pacific. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Vanguard Pacific Stock is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,443  in Vanguard Pacific Stock on September 12, 2024 and sell it today you would lose (29.00) from holding Vanguard Pacific Stock or give up 2.01% of portfolio value over 90 days.

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

Fidelity Nordic Fund  vs.  Vanguard Pacific Stock

Fidelity Nordic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Pacific Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Fidelity Nordic Fund and Vanguard Pacific Stock 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.