Correlation Between Vanguard Telecommunicatio and Fidelity Summer

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

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

Diversification Opportunities for Vanguard Telecommunicatio and Fidelity Summer

0.65

Correlation Coefficient

Vanguard Telecommunicatio  Fidelity Summer

Poor diversification

The 3 months correlation between Vanguard and Fidelity is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Telecommunication Ser and Fidelity Summer Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Summer Street and Vanguard Telecommunicatio 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 Telecommunication Services are associated (or correlated) with Fidelity Summer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Summer Street has no effect on the direction of Vanguard Telecommunicatio i.e., Vanguard Telecommunicatio and Fidelity Summer go up and down completely randomly.

Pair Corralation between Vanguard Telecommunicatio and Fidelity Summer

Assuming the 90 days horizon Vanguard Telecommunicatio is expected to generate 1.19 times less return on investment than Fidelity Summer. But when comparing it to its historical volatility, Vanguard Telecommunication Services is 1.2 times less risky than Fidelity Summer. It trades about 0.13 of its potential returns per unit of risk. Fidelity Summer Street is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Fidelity Summer Street on September 5, 2024 and sell it today you would earn a total of  237.00  from holding Fidelity Summer Street or generate 23.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	26.72%
Values	Daily Returns

Vanguard Telecommunication Ser  vs.  Fidelity Summer Street

Vanguard Telecommunicatio

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Telecommunication Services are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Telecommunicatio showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Summer Street

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Summer Street has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Summer 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 Telecommunicatio and Fidelity Summer

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

The idea behind Vanguard Telecommunication Services and Fidelity Summer Street 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.