Correlation Between Vanguard FTSE and Fidelity Dividend

Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Fidelity Dividend 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 Dividend 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 Dividend for, you can compare the effects of market volatilities on Vanguard FTSE and Fidelity Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Fidelity Dividend.

Diversification Opportunities for Vanguard FTSE and Fidelity Dividend

-0.16

Correlation Coefficient

Vanguard FTSE  Fidelity Dividend

Good diversification

The 3 months correlation between Vanguard and Fidelity is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Fidelity Dividend for in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Dividend for 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 Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Dividend for has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Fidelity Dividend go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Fidelity Dividend

Assuming the 90 days horizon Vanguard FTSE Developed is expected to generate 0.88 times more return on investment than Fidelity Dividend. However, Vanguard FTSE Developed is 1.14 times less risky than Fidelity Dividend. It trades about -0.16 of its potential returns per unit of risk. Fidelity Dividend for is currently generating about -0.16 per unit of risk. If you would invest  4,007  in Vanguard FTSE Developed on October 7, 2024 and sell it today you would lose (74.00) from holding Vanguard FTSE Developed or give up 1.85% of portfolio value over 90 days.

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

Vanguard FTSE Developed  vs.  Fidelity Dividend for

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic 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 Dividend for

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Dividend for are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and Fidelity Dividend

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

The idea behind Vanguard FTSE Developed and Fidelity Dividend for 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.