Correlation Between Vanguard Short-term and Fidelity Short-term
Can any of the company-specific risk be diversified away by investing in both Vanguard Short-term and Fidelity Short-term 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 Short-term and Fidelity Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Short Term Government and Fidelity Short Term Treasury, you can compare the effects of market volatilities on Vanguard Short-term and Fidelity Short-term 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 Short-term with a short position of Fidelity Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short-term and Fidelity Short-term.
Diversification Opportunities for Vanguard Short-term and Fidelity Short-term
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Fidelity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Government and Fidelity Short Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Short Term and Vanguard Short-term 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 Short Term Government are associated (or correlated) with Fidelity Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Short Term has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Fidelity Short-term go up and down completely randomly.
Pair Corralation between Vanguard Short-term and Fidelity Short-term
Assuming the 90 days horizon Vanguard Short Term Government is expected to generate 0.7 times more return on investment than Fidelity Short-term. However, Vanguard Short Term Government is 1.42 times less risky than Fidelity Short-term. It trades about -0.2 of its potential returns per unit of risk. Fidelity Short Term Treasury is currently generating about -0.23 per unit of risk. If you would invest 2,459 in Vanguard Short Term Government on August 26, 2024 and sell it today you would lose (21.00) from holding Vanguard Short Term Government or give up 0.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Government vs. Fidelity Short Term Treasury
Performance |
| Timeline |
| Vanguard Short Term |
| Fidelity Short Term |
Vanguard Short-term and Fidelity Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short-term and Fidelity Short-term
The main advantage of trading using opposite Vanguard Short-term and Fidelity Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short-term position performs unexpectedly, Fidelity Short-term 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 Short-term will offset losses from the drop in Fidelity Short-term's long position.The idea behind Vanguard Short Term Government and Fidelity Short Term Treasury 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.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |