Correlation Between Fidelity Zero and Vanguard Equity

Can any of the company-specific risk be diversified away by investing in both Fidelity Zero 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 Zero 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 Zero Total and Vanguard Equity Income, you can compare the effects of market volatilities on Fidelity Zero 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 Zero with a short position of Vanguard Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Zero and Vanguard Equity.

Diversification Opportunities for Fidelity Zero and Vanguard Equity

0.75

Correlation Coefficient

Fidelity Zero  Vanguard Equity

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 Zero Total 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 Zero 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 Zero Total 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 Zero i.e., Fidelity Zero and Vanguard Equity go up and down completely randomly.

Pair Corralation between Fidelity Zero and Vanguard Equity

Assuming the 90 days horizon Fidelity Zero Total is expected to generate 1.13 times more return on investment than Vanguard Equity. However, Fidelity Zero is 1.13 times more volatile than Vanguard Equity Income. It trades about 0.29 of its potential returns per unit of risk. Vanguard Equity Income is currently generating about 0.19 per unit of risk. If you would invest  1,880  in Fidelity Zero Total on September 6, 2024 and sell it today you would earn a total of  248.00  from holding Fidelity Zero Total or generate 13.19% return on investment over 90 days.

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

Fidelity Zero Total  vs.  Vanguard Equity Income

Fidelity Zero Total

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Zero Total are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Zero may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Equity Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Equity Income 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 Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Zero and Vanguard Equity

The main advantage of trading using opposite Fidelity Zero and Vanguard Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Zero 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 Zero Total 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.