Correlation Between Fidelity Long-term and Vanguard Long
Can any of the company-specific risk be diversified away by investing in both Fidelity Long-term and Vanguard Long 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 Long-term and Vanguard Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Long Term Treasury and Vanguard Long Term Government, you can compare the effects of market volatilities on Fidelity Long-term and Vanguard Long 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 Long-term with a short position of Vanguard Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Long-term and Vanguard Long.
Diversification Opportunities for Fidelity Long-term and Vanguard Long
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 Long Term Treasury and Vanguard Long Term Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and Fidelity Long-term 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 Long Term Treasury are associated (or correlated) with Vanguard Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Fidelity Long-term i.e., Fidelity Long-term and Vanguard Long go up and down completely randomly.
Pair Corralation between Fidelity Long-term and Vanguard Long
Assuming the 90 days horizon Fidelity Long Term Treasury is expected to generate 1.02 times more return on investment than Vanguard Long. However, Fidelity Long-term is 1.02 times more volatile than Vanguard Long Term Government. It trades about -0.09 of its potential returns per unit of risk. Vanguard Long Term Government is currently generating about -0.1 per unit of risk. If you would invest 959.00 in Fidelity Long Term Treasury on August 25, 2024 and sell it today you would lose (17.00) from holding Fidelity Long Term Treasury or give up 1.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Long Term Treasury vs. Vanguard Long Term Government
Performance |
| Timeline |
| Fidelity Long Term |
| Vanguard Long Term |
Fidelity Long-term and Vanguard Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Long-term and Vanguard Long
The main advantage of trading using opposite Fidelity Long-term and Vanguard Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Long-term position performs unexpectedly, Vanguard Long 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 Long will offset losses from the drop in Vanguard Long's long position.The idea behind Fidelity Long Term Treasury and Vanguard Long Term Government 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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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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