Correlation Between Vanguard Communication and Fidelity MSCI

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

Diversification Opportunities for Vanguard Communication and Fidelity MSCI

0.6

Correlation Coefficient

Vanguard Communication  Fidelity MSCI

Poor diversification

The 3 months correlation between Vanguard and Fidelity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Communication Service and Fidelity MSCI Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Utilities and Vanguard Communication 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 Communication Services 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 Utilities has no effect on the direction of Vanguard Communication i.e., Vanguard Communication and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Vanguard Communication and Fidelity MSCI

Considering the 90-day investment horizon Vanguard Communication Services is expected to generate 0.82 times more return on investment than Fidelity MSCI. However, Vanguard Communication Services is 1.22 times less risky than Fidelity MSCI. It trades about 0.3 of its potential returns per unit of risk. Fidelity MSCI Utilities is currently generating about 0.09 per unit of risk. If you would invest  13,655  in Vanguard Communication Services on September 5, 2024 and sell it today you would earn a total of  2,299  from holding Vanguard Communication Services or generate 16.84% return on investment over 90 days.

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

Vanguard Communication Service  vs.  Fidelity MSCI Utilities

Vanguard Communication

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Communication Services are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Vanguard Communication showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity MSCI Utilities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Utilities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Communication and Fidelity MSCI

The main advantage of trading using opposite Vanguard Communication and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Communication 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 Communication Services and Fidelity MSCI Utilities 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.