Correlation Between Fidelity International and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Fidelity International and Vanguard Total 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 Fidelity International and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity International High and Vanguard Total Market, you can compare the effects of market volatilities on Fidelity International and Vanguard Total 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 Fidelity International with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity International and Vanguard Total.
Diversification Opportunities for Fidelity International and Vanguard Total
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fidelity and Vanguard is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International High and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market and Fidelity International 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 Fidelity International High are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of Fidelity International i.e., Fidelity International and Vanguard Total go up and down completely randomly.
Pair Corralation between Fidelity International and Vanguard Total
Assuming the 90 days trading horizon Fidelity International is expected to generate 1.86 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Fidelity International High is 1.08 times less risky than Vanguard Total. It trades about 0.08 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,205 in Vanguard Total Market on September 1, 2024 and sell it today you would earn a total of 4,234 from holding Vanguard Total Market or generate 58.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity International High vs. Vanguard Total Market
Performance |
| Timeline |
| Fidelity International |
| Vanguard Total Market |
Fidelity International and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity International and Vanguard Total
The main advantage of trading using opposite Fidelity International and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity International position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.The idea behind Fidelity International High and Vanguard Total Market 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.
| Vanguard Total vs. Vanguard FTSE Canada | Vanguard Total vs. Vanguard FTSE Emerging | Vanguard Total vs. iShares Core MSCI | Vanguard Total vs. Vanguard Canadian Aggregate |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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