Correlation Between Vanguard Mid-cap and Fidelity Low-priced

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap and Fidelity Low-priced 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-cap and Fidelity Low-priced 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-cap and Fidelity Low-priced 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-cap with a short position of Fidelity Low-priced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Fidelity Low-priced.

Diversification Opportunities for Vanguard Mid-cap and Fidelity Low-priced

0.75

Correlation Coefficient

Vanguard Mid-cap  Fidelity Low-priced

Poor diversification

The 3 months correlation between Vanguard and Fidelity is 0.75. 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-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 Mid Cap Value are associated (or correlated) with Fidelity Low-priced. 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-cap i.e., Vanguard Mid-cap and Fidelity Low-priced go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Fidelity Low-priced

Assuming the 90 days horizon Vanguard Mid Cap Value is expected to generate 0.83 times more return on investment than Fidelity Low-priced. However, Vanguard Mid Cap Value is 1.21 times less risky than Fidelity Low-priced. It trades about 0.2 of its potential returns per unit of risk. Fidelity Low Priced Stock is currently generating about 0.07 per unit of risk. If you would invest  6,381  in Vanguard Mid Cap Value on August 31, 2024 and sell it today you would earn a total of  544.00  from holding Vanguard Mid Cap Value or generate 8.53% return on investment over 90 days.

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

Vanguard Mid Cap Value  vs.  Fidelity Low Priced Stock

Vanguard Mid Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Value are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Fidelity Low Priced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Priced Stock are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Low-priced 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-cap and Fidelity Low-priced

The main advantage of trading using opposite Vanguard Mid-cap and Fidelity Low-priced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid-cap position performs unexpectedly, Fidelity Low-priced 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-priced will offset losses from the drop in Fidelity Low-priced'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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.