Correlation Between Vanguard Energy and Fidelity Natural

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

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

Diversification Opportunities for Vanguard Energy and Fidelity Natural

0.08

Correlation Coefficient

Vanguard Energy  Fidelity Natural

Significant diversification

The 3 months correlation between Vanguard and Fidelity is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Fund and Fidelity Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Natural Res and Vanguard Energy 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 Energy Fund are associated (or correlated) with Fidelity Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Natural Res has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Fidelity Natural go up and down completely randomly.

Pair Corralation between Vanguard Energy and Fidelity Natural

Assuming the 90 days horizon Vanguard Energy Fund is expected to under-perform the Fidelity Natural. In addition to that, Vanguard Energy is 1.49 times more volatile than Fidelity Natural Resources. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Natural Resources is currently generating about 0.16 per unit of volatility. If you would invest  4,150  in Fidelity Natural Resources on December 25, 2024 and sell it today you would earn a total of  411.00  from holding Fidelity Natural Resources or generate 9.9% return on investment over 90 days.

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

Vanguard Energy Fund  vs.  Fidelity Natural Resources

Vanguard Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Natural Res

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Natural Resources are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Energy and Fidelity Natural

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

The idea behind Vanguard Energy Fund and Fidelity Natural Resources 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.