Correlation Between Fidelity Extended and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Fidelity Extended and Vanguard Extended 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 Extended and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Extended Market and Vanguard Extended Market, you can compare the effects of market volatilities on Fidelity Extended and Vanguard Extended 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 Extended with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Extended and Vanguard Extended.
Diversification Opportunities for Fidelity Extended and Vanguard Extended
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Extended Market and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Fidelity Extended 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 Extended Market are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Fidelity Extended i.e., Fidelity Extended and Vanguard Extended go up and down completely randomly.
Pair Corralation between Fidelity Extended and Vanguard Extended
Assuming the 90 days horizon Fidelity Extended Market is expected to generate 1.0 times more return on investment than Vanguard Extended. However, Fidelity Extended is 1.0 times more volatile than Vanguard Extended Market. It trades about 0.26 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.25 per unit of risk. If you would invest 8,718 in Fidelity Extended Market on August 29, 2024 and sell it today you would earn a total of 1,151 from holding Fidelity Extended Market or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Fidelity Extended Market vs. Vanguard Extended Market
Performance |
| Timeline |
| Fidelity Extended Market |
| Vanguard Extended Market |
Fidelity Extended and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Extended and Vanguard Extended
The main advantage of trading using opposite Fidelity Extended and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Extended position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.| Fidelity Extended vs. Fidelity International Index | Fidelity Extended vs. Fidelity 500 Index | Fidelity Extended vs. Fidelity Bond Index | Fidelity Extended vs. Fidelity Total Market |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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