Correlation Between Fidelity Nordic and Vanguard Balanced

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Can any of the company-specific risk be diversified away by investing in both Fidelity Nordic and Vanguard Balanced 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 Fidelity Nordic and Vanguard Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Nordic Fund and Vanguard Balanced Index, you can compare the effects of market volatilities on Fidelity Nordic and Vanguard Balanced 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 Fidelity Nordic with a short position of Vanguard Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Nordic and Vanguard Balanced.

Diversification Opportunities for Fidelity Nordic and Vanguard Balanced

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Fidelity and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding FIDELITY NORDIC FUND and Vanguard Balanced Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Balanced Index and Fidelity Nordic 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 Fidelity Nordic Fund are associated (or correlated) with Vanguard Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Balanced Index has no effect on the direction of Fidelity Nordic i.e., Fidelity Nordic and Vanguard Balanced go up and down completely randomly.

Pair Corralation between Fidelity Nordic and Vanguard Balanced

Assuming the 90 days horizon Fidelity Nordic Fund is expected to generate 1.62 times more return on investment than Vanguard Balanced. However, Fidelity Nordic is 1.62 times more volatile than Vanguard Balanced Index. It trades about 0.05 of its potential returns per unit of risk. Vanguard Balanced Index is currently generating about 0.05 per unit of risk. If you would invest  5,239  in Fidelity Nordic Fund on December 29, 2023 and sell it today you would earn a total of  1,538  from holding Fidelity Nordic Fund or generate 29.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

FIDELITY NORDIC FUND  vs.  Vanguard Balanced Index

 Performance 
       Timeline  
Fidelity Nordic Fund 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Nordic Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Nordic may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Vanguard Balanced Index 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Index are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Nordic and Vanguard Balanced Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Nordic and Vanguard Balanced

The main advantage of trading using opposite Fidelity Nordic and Vanguard Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Nordic position performs unexpectedly, Vanguard Balanced 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 Vanguard Balanced will offset losses from the drop in Vanguard Balanced's long position.
The idea behind Fidelity Nordic Fund and Vanguard Balanced Index 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.
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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