Correlation Between Vanguard Small-cap and Fidelity Advisor

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

By analyzing existing cross correlation between Vanguard Small Cap Growth and Fidelity Advisor Floating, you can compare the effects of market volatilities on Vanguard Small-cap and Fidelity Advisor 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 Small-cap with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Fidelity Advisor.

Diversification Opportunities for Vanguard Small-cap and Fidelity Advisor

0.38

Correlation Coefficient

Vanguard Small-cap  Fidelity Advisor

Weak diversification

The 3 months correlation between Vanguard and Fidelity is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Fidelity Advisor Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Floating and Vanguard Small-cap 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 Small Cap Growth are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Floating has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Fidelity Advisor

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to under-perform the Fidelity Advisor. In addition to that, Vanguard Small-cap is 10.15 times more volatile than Fidelity Advisor Floating. It trades about -0.11 of its total potential returns per unit of risk. Fidelity Advisor Floating is currently generating about 0.03 per unit of volatility. If you would invest  916.00  in Fidelity Advisor Floating on December 30, 2024 and sell it today you would earn a total of  2.00  from holding Fidelity Advisor Floating or generate 0.22% return on investment over 90 days.

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

Vanguard Small Cap Growth  vs.  Fidelity Advisor Floating

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fidelity Advisor Floating

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Floating are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Advisor 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 Small-cap and Fidelity Advisor

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

The idea behind Vanguard Small Cap Growth and Fidelity Advisor Floating 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.