Correlation Between Vanguard Mid and Fidelity Covington
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and Fidelity Covington 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 Mid and Fidelity Covington into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Index and Fidelity Covington Trust, you can compare the effects of market volatilities on Vanguard Mid and Fidelity Covington 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 Mid with a short position of Fidelity Covington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Fidelity Covington.
Diversification Opportunities for Vanguard Mid and Fidelity Covington
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Fidelity Covington go up and down completely randomly.
Pair Corralation between Vanguard Mid and Fidelity Covington
Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 0.78 times more return on investment than Fidelity Covington. However, Vanguard Mid Cap Index is 1.28 times less risky than Fidelity Covington. It trades about 0.18 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.11 per unit of risk. If you would invest 24,022 in Vanguard Mid Cap Index on September 1, 2024 and sell it today you would earn a total of 4,441 from holding Vanguard Mid Cap Index or generate 18.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Index vs. Fidelity Covington Trust
Performance |
| Timeline |
| Vanguard Mid Cap |
| Fidelity Covington Trust |
Vanguard Mid and Fidelity Covington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and Fidelity Covington
The main advantage of trading using opposite Vanguard Mid and Fidelity Covington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid position performs unexpectedly, Fidelity Covington 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 Covington will offset losses from the drop in Fidelity Covington's long position.| Vanguard Mid vs. Vanguard Small Cap Index | Vanguard Mid vs. Vanguard Large Cap Index | Vanguard Mid vs. Vanguard Small Cap Growth | Vanguard Mid vs. Vanguard Small Cap Value |
| Fidelity Covington vs. Fidelity MSCI Financials | Fidelity Covington vs. Fidelity MSCI Consumer | Fidelity Covington vs. Fidelity MSCI Consumer | Fidelity Covington vs. Fidelity MSCI Industrials |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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