Correlation Between Vanguard Municipal and Fidelity Advisor

Can any of the company-specific risk be diversified away by investing in both Vanguard Municipal 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 Municipal 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 Municipal Bond and Fidelity Advisor Growth, you can compare the effects of market volatilities on Vanguard Municipal 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 Municipal with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Municipal and Fidelity Advisor.

Diversification Opportunities for Vanguard Municipal and Fidelity Advisor

0.64

Correlation Coefficient

Vanguard Municipal  Fidelity Advisor

Poor diversification

The 3 months correlation between Vanguard and Fidelity is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Municipal Bond and Fidelity Advisor Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Growth and Vanguard Municipal 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 Municipal Bond 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 Growth has no effect on the direction of Vanguard Municipal i.e., Vanguard Municipal and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Vanguard Municipal and Fidelity Advisor

If you would invest  17,340  in Fidelity Advisor Growth on September 15, 2024 and sell it today you would earn a total of  770.00  from holding Fidelity Advisor Growth or generate 4.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Vanguard Municipal Bond  vs.  Fidelity Advisor Growth

Vanguard Municipal Bond

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Municipal Bond are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Advisor Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Municipal and Fidelity Advisor

The main advantage of trading using opposite Vanguard Municipal and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Municipal 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 Municipal Bond and Fidelity Advisor Growth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.