Correlation Between Vanguard FTSE and Fidelity Canadian

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

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

Diversification Opportunities for Vanguard FTSE and Fidelity Canadian

0.57

Correlation Coefficient

Vanguard FTSE  Fidelity Canadian

Very weak diversification

The 3 months correlation between Vanguard and Fidelity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Fidelity Canadian High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian High and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian High has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Fidelity Canadian go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Fidelity Canadian

Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 3.63 times less return on investment than Fidelity Canadian. In addition to that, Vanguard FTSE is 1.51 times more volatile than Fidelity Canadian High. It trades about 0.05 of its total potential returns per unit of risk. Fidelity Canadian High is currently generating about 0.28 per unit of volatility. If you would invest  2,870  in Fidelity Canadian High on September 3, 2024 and sell it today you would earn a total of  236.00  from holding Fidelity Canadian High or generate 8.22% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Fidelity Canadian High

Vanguard FTSE Developed

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity Canadian High

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian High are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fidelity Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard FTSE and Fidelity Canadian

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

The idea behind Vanguard FTSE Developed and Fidelity Canadian High 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.