Correlation Between Vanguard Developed and Fidelity International
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed and Fidelity International 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 Developed and Fidelity International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Developed Markets and Fidelity International Index, you can compare the effects of market volatilities on Vanguard Developed and Fidelity International 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 Developed with a short position of Fidelity International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Fidelity International.
Diversification Opportunities for Vanguard Developed and Fidelity International
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Fidelity International Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Vanguard Developed 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 Developed Markets are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and Fidelity International go up and down completely randomly.
Pair Corralation between Vanguard Developed and Fidelity International
Assuming the 90 days horizon Vanguard Developed Markets is expected to generate 0.96 times more return on investment than Fidelity International. However, Vanguard Developed Markets is 1.04 times less risky than Fidelity International. It trades about -0.21 of its potential returns per unit of risk. Fidelity International Index is currently generating about -0.23 per unit of risk. If you would invest 1,315 in Vanguard Developed Markets on August 29, 2024 and sell it today you would lose (79.00) from holding Vanguard Developed Markets or give up 6.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Developed Markets vs. Fidelity International Index
Performance |
| Timeline |
| Vanguard Developed |
| Fidelity International |
Vanguard Developed and Fidelity International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Developed and Fidelity International
The main advantage of trading using opposite Vanguard Developed and Fidelity International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed position performs unexpectedly, Fidelity International 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 International will offset losses from the drop in Fidelity International's long position.The idea behind Vanguard Developed Markets and Fidelity International Index 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 International vs. Fidelity Emerging Markets | Fidelity International vs. Fidelity Small Cap | Fidelity International vs. Fidelity Bond Index | Fidelity International vs. Fidelity Mid Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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