Correlation Between Vanguard Equity and Fidelity Zero

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

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

Diversification Opportunities for Vanguard Equity and Fidelity Zero

0.93

Correlation Coefficient

Vanguard Equity  Fidelity Zero

Almost no diversification

The 3 months correlation between Vanguard and FIDELITY is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Equity Income and Fidelity Zero Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Zero Total and Vanguard Equity 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 Equity Income are associated (or correlated) with Fidelity Zero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Zero Total has no effect on the direction of Vanguard Equity i.e., Vanguard Equity and Fidelity Zero go up and down completely randomly.

Pair Corralation between Vanguard Equity and Fidelity Zero

Assuming the 90 days horizon Vanguard Equity Income is expected to under-perform the Fidelity Zero. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Equity Income is 1.0 times less risky than Fidelity Zero. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Fidelity Zero Total is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,107  in Fidelity Zero Total on September 11, 2024 and sell it today you would earn a total of  36.00  from holding Fidelity Zero Total or generate 1.71% return on investment over 90 days.

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

Vanguard Equity Income  vs.  Fidelity Zero Total

Vanguard Equity Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Equity Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Zero Total

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Zero Total are ranked lower than 19 (%) 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.

Pair Trading with Vanguard Equity and Fidelity Zero

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

The idea behind Vanguard Equity Income and Fidelity Zero Total 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.