Correlation Between Vanguard High and Fidelity Low

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

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

Diversification Opportunities for Vanguard High and Fidelity Low

0.91

Correlation Coefficient

Vanguard High  Fidelity Low

Almost no diversification

The 3 months correlation between Vanguard and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Dividend and Fidelity Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Volatility and Vanguard High 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 High Dividend are associated (or correlated) with Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Volatility has no effect on the direction of Vanguard High i.e., Vanguard High and Fidelity Low go up and down completely randomly.

Pair Corralation between Vanguard High and Fidelity Low

Considering the 90-day investment horizon Vanguard High is expected to generate 4.16 times less return on investment than Fidelity Low. In addition to that, Vanguard High is 1.64 times more volatile than Fidelity Low Volatility. It trades about 0.04 of its total potential returns per unit of risk. Fidelity Low Volatility is currently generating about 0.27 per unit of volatility. If you would invest  6,137  in Fidelity Low Volatility on September 17, 2024 and sell it today you would earn a total of  106.00  from holding Fidelity Low Volatility or generate 1.73% return on investment over 90 days.

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

Vanguard High Dividend  vs.  Fidelity Low Volatility

Vanguard High Dividend

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Fidelity Low Volatility

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Volatility are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Fidelity Low is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard High and Fidelity Low

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

The idea behind Vanguard High Dividend and Fidelity Low Volatility 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.