Correlation Between Vanguard Industrials and Fidelity MSCI

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

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

Diversification Opportunities for Vanguard Industrials and Fidelity MSCI

1.0

Correlation Coefficient

Vanguard Industrials  Fidelity MSCI

No risk reduction

The 3 months correlation between Vanguard and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Industrials Index and Fidelity MSCI Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Industrials and Vanguard Industrials 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 Industrials Index are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Industrials has no effect on the direction of Vanguard Industrials i.e., Vanguard Industrials and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Vanguard Industrials and Fidelity MSCI

Considering the 90-day investment horizon Vanguard Industrials Index is expected to generate 1.0 times more return on investment than Fidelity MSCI. However, Vanguard Industrials Index is 1.0 times less risky than Fidelity MSCI. It trades about 0.25 of its potential returns per unit of risk. Fidelity MSCI Industrials is currently generating about 0.25 per unit of risk. If you would invest  25,837  in Vanguard Industrials Index on September 5, 2024 and sell it today you would earn a total of  1,744  from holding Vanguard Industrials Index or generate 6.75% return on investment over 90 days.

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

Vanguard Industrials Index  vs.  Fidelity MSCI Industrials

Vanguard Industrials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Industrials Index are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal forward indicators, Vanguard Industrials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fidelity MSCI Industrials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Industrials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Industrials and Fidelity MSCI

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

The idea behind Vanguard Industrials Index and Fidelity MSCI Industrials 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.