Correlation Between Fidelity MSCI and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both Fidelity MSCI and Vanguard Consumer 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 MSCI and Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity MSCI Consumer and Vanguard Consumer Discretionary, you can compare the effects of market volatilities on Fidelity MSCI and Vanguard Consumer 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 MSCI with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity MSCI and Vanguard Consumer.
Diversification Opportunities for Fidelity MSCI and Vanguard Consumer
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity MSCI Consumer and Vanguard Consumer Discretionar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer and Fidelity MSCI 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 MSCI Consumer are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer has no effect on the direction of Fidelity MSCI i.e., Fidelity MSCI and Vanguard Consumer go up and down completely randomly.
Pair Corralation between Fidelity MSCI and Vanguard Consumer
Given the investment horizon of 90 days Fidelity MSCI Consumer is expected to generate about the same return on investment as Vanguard Consumer Discretionary. But, Fidelity MSCI Consumer is 1.01 times less risky than Vanguard Consumer. It trades about 0.09 of its potential returns per unit of risk. Vanguard Consumer Discretionary is currently generating about 0.08 per unit of risk. If you would invest 23,057 in Vanguard Consumer Discretionary on August 27, 2024 and sell it today you would earn a total of 13,793 from holding Vanguard Consumer Discretionary or generate 59.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity MSCI Consumer vs. Vanguard Consumer Discretionar
Performance |
| Timeline |
| Fidelity MSCI Consumer |
| Vanguard Consumer |
Fidelity MSCI and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity MSCI and Vanguard Consumer
The main advantage of trading using opposite Fidelity MSCI and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity MSCI position performs unexpectedly, Vanguard Consumer 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 Consumer will offset losses from the drop in Vanguard Consumer's long position.| Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Industrials | Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Communication |
| Vanguard Consumer vs. Vanguard Consumer Staples | Vanguard Consumer vs. Vanguard Industrials Index | Vanguard Consumer vs. Vanguard Communication Services | Vanguard Consumer vs. Vanguard Materials Index |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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