Correlation Between Fidelity MSCI and Vanguard Real

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

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

Diversification Opportunities for Fidelity MSCI and Vanguard Real

1.0

Correlation Coefficient

Fidelity MSCI  Vanguard Real

No risk reduction

The 3 months correlation between Fidelity and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Real and Vanguard Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Real Estate and Fidelity MSCI 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 MSCI Real are associated (or correlated) with Vanguard Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Real Estate has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Vanguard Real go up and down completely randomly.

Pair Corralation between Fidelity MSCI and Vanguard Real

Given the investment horizon of 90 days Fidelity MSCI Real is expected to under-perform the Vanguard Real. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity MSCI Real is 1.01 times less risky than Vanguard Real. The etf trades about -0.03 of its potential returns per unit of risk. The Vanguard Real Estate is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,580  in Vanguard Real Estate on December 2, 2024 and sell it today you would lose (190.00) from holding Vanguard Real Estate or give up 1.98% of portfolio value over 90 days.

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

Fidelity MSCI Real  vs.  Vanguard Real Estate

Fidelity MSCI Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity MSCI Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Vanguard Real is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fidelity MSCI and Vanguard Real

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

The idea behind Fidelity MSCI Real and Vanguard Real Estate 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.