Correlation Between Vanguard Mid and Fidelity Low

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

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

Diversification Opportunities for Vanguard Mid and Fidelity Low

0.93

Correlation Coefficient

Vanguard Mid  Fidelity Low

Almost no diversification

The 3 months correlation between Vanguard and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Fidelity Low Priced Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Priced and Vanguard Mid 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 Mid Cap Value are associated (or correlated) with Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Priced has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Fidelity Low go up and down completely randomly.

Pair Corralation between Vanguard Mid and Fidelity Low

Assuming the 90 days horizon Vanguard Mid Cap Value is expected to under-perform the Fidelity Low. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Mid Cap Value is 1.01 times less risky than Fidelity Low. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Fidelity Low Priced Stock is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,068  in Fidelity Low Priced Stock on December 31, 2024 and sell it today you would lose (43.00) from holding Fidelity Low Priced Stock or give up 1.06% of portfolio value over 90 days.

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

Vanguard Mid Cap Value  vs.  Fidelity Low Priced Stock

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Low Priced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Low Priced Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Low 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 Mid and Fidelity Low

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

The idea behind Vanguard Mid Cap Value and Fidelity Low Priced Stock 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.