Correlation Between Fidelity Nordic and Vanguard Short-term

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Can any of the company-specific risk be diversified away by investing in both Fidelity Nordic and Vanguard 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 Fidelity Nordic and Vanguard Short-term 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 Short Term Porate, you can compare the effects of market volatilities on Fidelity Nordic and Vanguard 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 Fidelity Nordic with a short position of Vanguard Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Nordic and Vanguard Short-term.

Diversification Opportunities for Fidelity Nordic and Vanguard Short-term

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fidelity and Vanguard is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding FIDELITY NORDIC FUND and VANGUARD SHORT-TERM PORATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short-term 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 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 Vanguard Short-term has no effect on the direction of Fidelity Nordic i.e., Fidelity Nordic and Vanguard Short-term go up and down completely randomly.

Pair Corralation between Fidelity Nordic and Vanguard Short-term

Assuming the 90 days horizon Fidelity Nordic Fund is expected to generate 6.93 times more return on investment than Vanguard Short-term. However, Fidelity Nordic is 6.93 times more volatile than Vanguard Short Term Porate. It trades about 0.14 of its potential returns per unit of risk. Vanguard Short Term Porate is currently generating about 0.25 per unit of risk. If you would invest  6,583  in Fidelity Nordic Fund on December 29, 2023 and sell it today you would earn a total of  194.00  from holding Fidelity Nordic Fund or generate 2.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

FIDELITY NORDIC FUND  vs.  VANGUARD SHORT-TERM PORATE

 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 Short-term 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Porate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Short-term 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 Short-term Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Nordic and Vanguard Short-term

The main advantage of trading using opposite Fidelity Nordic and Vanguard Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Nordic position performs unexpectedly, Vanguard 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 Vanguard Short-term will offset losses from the drop in Vanguard Short-term's long position.
The idea behind Fidelity Nordic Fund and Vanguard Short Term Porate 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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