Correlation Between Vanguard California and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Vanguard California and Fidelity Advisor 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 California and Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard California Long Term and Fidelity Advisor Growth, you can compare the effects of market volatilities on Vanguard California and Fidelity Advisor 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 California with a short position of Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and Fidelity Advisor.
Diversification Opportunities for Vanguard California and Fidelity Advisor
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VANGUARD and Fidelity is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Long Term and Fidelity Advisor Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Growth and Vanguard California 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 California Long Term are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Growth has no effect on the direction of Vanguard California i.e., Vanguard California and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Vanguard California and Fidelity Advisor
Assuming the 90 days horizon Vanguard California is expected to generate 7.52 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Vanguard California Long Term is 4.57 times less risky than Fidelity Advisor. It trades about 0.07 of its potential returns per unit of risk. Fidelity Advisor Growth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 10,131 in Fidelity Advisor Growth on September 5, 2024 and sell it today you would earn a total of 10,019 from holding Fidelity Advisor Growth or generate 98.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard California Long Term vs. Fidelity Advisor Growth
Performance |
| Timeline |
| Vanguard California |
| Fidelity Advisor Growth |
Vanguard California and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard California and Fidelity Advisor
The main advantage of trading using opposite Vanguard California and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard California position performs unexpectedly, Fidelity Advisor 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 Advisor will offset losses from the drop in Fidelity Advisor's long position.The idea behind Vanguard California Long Term and Fidelity Advisor Growth 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.
| Fidelity Advisor vs. California High Yield Municipal | Fidelity Advisor vs. Cs 607 Tax | Fidelity Advisor vs. Ab Impact Municipal | Fidelity Advisor vs. Vanguard California Long Term |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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