Correlation Between Vanguard Real and Fidelity MSCI

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

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

Diversification Opportunities for Vanguard Real and Fidelity MSCI

1.0

Correlation Coefficient

Vanguard Real  Fidelity MSCI

No risk reduction

The 3 months correlation between Vanguard and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and Fidelity MSCI Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Real and Vanguard Real 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 Real Estate are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Real has no effect on the direction of Vanguard Real i.e., Vanguard Real and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Vanguard Real and Fidelity MSCI

Considering the 90-day investment horizon Vanguard Real Estate is expected to generate 1.02 times more return on investment than Fidelity MSCI. However, Vanguard Real is 1.02 times more volatile than Fidelity MSCI Real. It trades about 0.04 of its potential returns per unit of risk. Fidelity MSCI Real is currently generating about 0.04 per unit of risk. If you would invest  8,741  in Vanguard Real Estate on December 29, 2024 and sell it today you would earn a total of  230.00  from holding Vanguard Real Estate or generate 2.63% return on investment over 90 days.

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

Vanguard Real Estate  vs.  Fidelity MSCI Real

Vanguard Real Estate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Vanguard Real is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Fidelity MSCI Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Real are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Real and Fidelity MSCI

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

The idea behind Vanguard Real Estate and Fidelity MSCI Real 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.