Correlation Between Vanguard Russell and Fidelity Zero

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

By analyzing existing cross correlation between Vanguard Russell 2000 and Fidelity Zero Large, you can compare the effects of market volatilities on Vanguard Russell and Fidelity Zero 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 Zero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Fidelity Zero.

Diversification Opportunities for Vanguard Russell and Fidelity Zero

0.94

Correlation Coefficient

Vanguard Russell  Fidelity Zero

Almost no diversification

The 3 months correlation between Vanguard and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and Fidelity Zero Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Zero Large 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 2000 are associated (or correlated) with Fidelity Zero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Zero Large has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and Fidelity Zero go up and down completely randomly.

Pair Corralation between Vanguard Russell and Fidelity Zero

Given the investment horizon of 90 days Vanguard Russell 2000 is expected to under-perform the Fidelity Zero. In addition to that, Vanguard Russell is 1.15 times more volatile than Fidelity Zero Large. It trades about -0.12 of its total potential returns per unit of risk. Fidelity Zero Large is currently generating about -0.08 per unit of volatility. If you would invest  2,101  in Fidelity Zero Large on December 30, 2024 and sell it today you would lose (114.00) from holding Fidelity Zero Large or give up 5.43% 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 2000  vs.  Fidelity Zero Large

Vanguard Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Fidelity Zero Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Zero Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Fidelity Zero 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 Russell and Fidelity Zero

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

The idea behind Vanguard Russell 2000 and Fidelity Zero Large 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.