Correlation Between Vanguard Energy and Fidelity Natural
Can any of the company-specific risk be diversified away by investing in both Vanguard Energy and Fidelity Natural 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 Energy and Fidelity Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Energy Fund and Fidelity Natural Resources, you can compare the effects of market volatilities on Vanguard Energy and Fidelity Natural 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 Energy with a short position of Fidelity Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Fidelity Natural.
Diversification Opportunities for Vanguard Energy and Fidelity Natural
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Fidelity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Fund and Fidelity Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Natural Res and Vanguard Energy 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 Energy Fund are associated (or correlated) with Fidelity Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Natural Res has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Fidelity Natural go up and down completely randomly.
Pair Corralation between Vanguard Energy and Fidelity Natural
Assuming the 90 days horizon Vanguard Energy is expected to generate 1.67 times less return on investment than Fidelity Natural. But when comparing it to its historical volatility, Vanguard Energy Fund is 1.24 times less risky than Fidelity Natural. It trades about 0.02 of its potential returns per unit of risk. Fidelity Natural Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,873 in Fidelity Natural Resources on October 25, 2024 and sell it today you would earn a total of 520.00 from holding Fidelity Natural Resources or generate 13.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Energy Fund vs. Fidelity Natural Resources
Performance |
| Timeline |
| Vanguard Energy |
| Fidelity Natural Res |
Vanguard Energy and Fidelity Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Energy and Fidelity Natural
The main advantage of trading using opposite Vanguard Energy and Fidelity Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy position performs unexpectedly, Fidelity Natural 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 Natural will offset losses from the drop in Fidelity Natural's long position.| Vanguard Energy vs. Vanguard Global Capital | Vanguard Energy vs. Vanguard Health Care | Vanguard Energy vs. Vanguard Reit Index | Vanguard Energy vs. Vanguard Emerging Markets |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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