Correlation Between Vanguard Total and Fidelity Fundamental
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Fidelity Fundamental 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 Total and Fidelity Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and Fidelity Fundamental Large, you can compare the effects of market volatilities on Vanguard Total and Fidelity Fundamental 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 Total with a short position of Fidelity Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Fidelity Fundamental.
Diversification Opportunities for Vanguard Total and Fidelity Fundamental
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Fidelity Fundamental Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Fundamental and Vanguard Total 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 Total Stock are associated (or correlated) with Fidelity Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Fundamental has no effect on the direction of Vanguard Total i.e., Vanguard Total and Fidelity Fundamental go up and down completely randomly.
Pair Corralation between Vanguard Total and Fidelity Fundamental
Considering the 90-day investment horizon Vanguard Total is expected to generate 1.1 times less return on investment than Fidelity Fundamental. But when comparing it to its historical volatility, Vanguard Total Stock is 1.06 times less risky than Fidelity Fundamental. It trades about 0.13 of its potential returns per unit of risk. Fidelity Fundamental Large is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,067 in Fidelity Fundamental Large on August 30, 2024 and sell it today you would earn a total of 1,668 from holding Fidelity Fundamental Large or generate 54.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Stock vs. Fidelity Fundamental Large
Performance |
| Timeline |
| Vanguard Total Stock |
| Fidelity Fundamental |
Vanguard Total and Fidelity Fundamental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Fidelity Fundamental
The main advantage of trading using opposite Vanguard Total and Fidelity Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Fidelity Fundamental 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 Fundamental will offset losses from the drop in Fidelity Fundamental's long position.| Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Real Estate | Vanguard Total 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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