Correlation Between Vanguard 500 and Fidelity® Government
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Fidelity® Government 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 500 and Fidelity® Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Fidelity Government Money, you can compare the effects of market volatilities on Vanguard 500 and Fidelity® Government 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 500 with a short position of Fidelity® Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Fidelity® Government.
Diversification Opportunities for Vanguard 500 and Fidelity® Government
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vanguard and Fidelity® is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Fidelity Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Government Money and Vanguard 500 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 500 Index are associated (or correlated) with Fidelity® Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Government Money has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Fidelity® Government go up and down completely randomly.
Pair Corralation between Vanguard 500 and Fidelity® Government
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 10.88 times more return on investment than Fidelity® Government. However, Vanguard 500 is 10.88 times more volatile than Fidelity Government Money. It trades about 0.15 of its potential returns per unit of risk. Fidelity Government Money is currently generating about 0.07 per unit of risk. If you would invest 42,190 in Vanguard 500 Index on September 4, 2024 and sell it today you would earn a total of 13,589 from holding Vanguard 500 Index or generate 32.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 80.97% |
| Values | Daily Returns |
Vanguard 500 Index vs. Fidelity Government Money
Performance |
| Timeline |
| Vanguard 500 Index |
| Fidelity Government Money |
Vanguard 500 and Fidelity® Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Fidelity® Government
The main advantage of trading using opposite Vanguard 500 and Fidelity® Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Fidelity® Government 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® Government will offset losses from the drop in Fidelity® Government's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Total Bond |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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