Correlation Between Vanguard Inflation-protec and Fidelity Inflation-protec

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

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

Diversification Opportunities for Vanguard Inflation-protec and Fidelity Inflation-protec

1.0

Correlation Coefficient

Vanguard Inflation-protec  Fidelity Inflation-protec

No risk reduction

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

Pair Corralation between Vanguard Inflation-protec and Fidelity Inflation-protec

Assuming the 90 days horizon Vanguard Inflation-protec is expected to generate 1.01 times less return on investment than Fidelity Inflation-protec. But when comparing it to its historical volatility, Vanguard Inflation Protected Securities is 1.0 times less risky than Fidelity Inflation-protec. It trades about 0.21 of its potential returns per unit of risk. Fidelity Inflation Protected Bond is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Fidelity Inflation Protected Bond on December 23, 2024 and sell it today you would earn a total of  31.00  from holding Fidelity Inflation Protected Bond or generate 3.49% return on investment over 90 days.

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

Vanguard Inflation Protected S  vs.  Fidelity Inflation Protected B

Vanguard Inflation-protec

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Inflation Protected Securities are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Inflation-protec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Inflation-protec

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Inflation Protected Bond are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Inflation-protec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Inflation-protec and Fidelity Inflation-protec

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

The idea behind Vanguard Inflation Protected Securities and Fidelity Inflation Protected Bond 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.