Correlation Between Vanguard Target and Fidelity 500
Can any of the company-specific risk be diversified away by investing in both Vanguard Target and Fidelity 500 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 Target and Fidelity 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Target Retirement and Fidelity 500 Index, you can compare the effects of market volatilities on Vanguard Target and Fidelity 500 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 Target with a short position of Fidelity 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Fidelity 500.
Diversification Opportunities for Vanguard Target and Fidelity 500
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Fidelity 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity 500 Index and Vanguard Target 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 Target Retirement are associated (or correlated) with Fidelity 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity 500 Index has no effect on the direction of Vanguard Target i.e., Vanguard Target and Fidelity 500 go up and down completely randomly.
Pair Corralation between Vanguard Target and Fidelity 500
Assuming the 90 days horizon Vanguard Target is expected to generate 1.8 times less return on investment than Fidelity 500. But when comparing it to its historical volatility, Vanguard Target Retirement is 1.5 times less risky than Fidelity 500. It trades about 0.09 of its potential returns per unit of risk. Fidelity 500 Index is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 13,478 in Fidelity 500 Index on September 2, 2024 and sell it today you would earn a total of 7,513 from holding Fidelity 500 Index or generate 55.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Target Retirement vs. Fidelity 500 Index
Performance |
| Timeline |
| Vanguard Target Reti |
| Fidelity 500 Index |
Vanguard Target and Fidelity 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and Fidelity 500
The main advantage of trading using opposite Vanguard Target and Fidelity 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target position performs unexpectedly, Fidelity 500 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 500 will offset losses from the drop in Fidelity 500's long position.| Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement |
| Fidelity 500 vs. Fidelity Total Market | Fidelity 500 vs. Fidelity Extended Market | Fidelity 500 vs. Fidelity Zero Total | Fidelity 500 vs. Fidelity Small 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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