Correlation Between Vanguard Russell and Fidelity Nasdaq

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

By analyzing existing cross correlation between Vanguard Russell 1000 and Fidelity Nasdaq Composite, you can compare the effects of market volatilities on Vanguard Russell and Fidelity Nasdaq 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 Russell with a short position of Fidelity Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Fidelity Nasdaq.

Diversification Opportunities for Vanguard Russell and Fidelity Nasdaq

1.0

Correlation Coefficient

Vanguard Russell  Fidelity Nasdaq

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 Russell 1000 and Fidelity Nasdaq Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Nasdaq Composite and Vanguard Russell 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 Russell 1000 are associated (or correlated) with Fidelity Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Nasdaq Composite has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and Fidelity Nasdaq go up and down completely randomly.

Pair Corralation between Vanguard Russell and Fidelity Nasdaq

Given the investment horizon of 90 days Vanguard Russell 1000 is expected to generate 0.96 times more return on investment than Fidelity Nasdaq. However, Vanguard Russell 1000 is 1.04 times less risky than Fidelity Nasdaq. It trades about -0.12 of its potential returns per unit of risk. Fidelity Nasdaq Composite is currently generating about -0.12 per unit of risk. If you would invest  10,406  in Vanguard Russell 1000 on December 30, 2024 and sell it today you would lose (1,135) from holding Vanguard Russell 1000 or give up 10.91% of portfolio value over 90 days.

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

Vanguard Russell 1000  vs.  Fidelity Nasdaq Composite

Vanguard Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Fidelity Nasdaq Composite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Nasdaq Composite has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Etf's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Vanguard Russell and Fidelity Nasdaq

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

The idea behind Vanguard Russell 1000 and Fidelity Nasdaq Composite 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.