Correlation Between Vanguard Emerging and Fidelity Real

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

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

Diversification Opportunities for Vanguard Emerging and Fidelity Real

0.03

Correlation Coefficient

Vanguard Emerging  Fidelity Real

Significant diversification

The 3 months correlation between Vanguard and Fidelity is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Fidelity Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Real Estate and Vanguard Emerging 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 Emerging Markets are associated (or correlated) with Fidelity Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Real Estate has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Fidelity Real go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Fidelity Real

Assuming the 90 days horizon Vanguard Emerging Markets is expected to generate 2.09 times more return on investment than Fidelity Real. However, Vanguard Emerging is 2.09 times more volatile than Fidelity Real Estate. It trades about 0.06 of its potential returns per unit of risk. Fidelity Real Estate is currently generating about 0.1 per unit of risk. If you would invest  2,524  in Vanguard Emerging Markets on September 12, 2024 and sell it today you would earn a total of  427.00  from holding Vanguard Emerging Markets or generate 16.92% return on investment over 90 days.

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

Vanguard Emerging Markets  vs.  Fidelity Real Estate

Vanguard Emerging Markets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Fidelity Real 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 Emerging and Fidelity Real

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

The idea behind Vanguard Emerging Markets and Fidelity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.