Correlation Between Vanguard Information and Fidelity Select

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

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

Diversification Opportunities for Vanguard Information and Fidelity Select

0.9

Correlation Coefficient

Vanguard Information  Fidelity Select

Almost no diversification

The 3 months correlation between VANGUARD and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and Fidelity Select Semiconductors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Select Semi and Vanguard Information 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 Information Technology are associated (or correlated) with Fidelity Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Select Semi has no effect on the direction of Vanguard Information i.e., Vanguard Information and Fidelity Select go up and down completely randomly.

Pair Corralation between Vanguard Information and Fidelity Select

Assuming the 90 days horizon Vanguard Information Technology is expected to generate 0.63 times more return on investment than Fidelity Select. However, Vanguard Information Technology is 1.59 times less risky than Fidelity Select. It trades about -0.1 of its potential returns per unit of risk. Fidelity Select Semiconductors is currently generating about -0.07 per unit of risk. If you would invest  32,132  in Vanguard Information Technology on December 28, 2024 and sell it today you would lose (3,602) from holding Vanguard Information Technology or give up 11.21% of portfolio value over 90 days.

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

Vanguard Information Technolog  vs.  Fidelity Select Semiconductors

Vanguard Information

Risk-Adjusted Performance

Very Weak

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

Fidelity Select Semi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Select Semiconductors has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Information and Fidelity Select

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

The idea behind Vanguard Information Technology and Fidelity Select Semiconductors 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.