Correlation Between Fidelity High and Vanguard Total

Can any of the company-specific risk be diversified away by investing in both Fidelity High and Vanguard Total 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 High and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity High Yield and Vanguard Total Corporate, you can compare the effects of market volatilities on Fidelity High and Vanguard Total 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 High with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity High and Vanguard Total.

Diversification Opportunities for Fidelity High and Vanguard Total

0.52

Correlation Coefficient

Fidelity High  Vanguard Total

Very weak diversification

The 3 months correlation between Fidelity and Vanguard is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity High Yield and Vanguard Total Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Corporate and Fidelity High 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 High Yield are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Corporate has no effect on the direction of Fidelity High i.e., Fidelity High and Vanguard Total go up and down completely randomly.

Pair Corralation between Fidelity High and Vanguard Total

Given the investment horizon of 90 days Fidelity High is expected to generate 1.13 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Fidelity High Yield is 1.04 times less risky than Vanguard Total. It trades about 0.26 of its potential returns per unit of risk. Vanguard Total Corporate is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  7,428  in Vanguard Total Corporate on February 21, 2024 and sell it today you would earn a total of  139.00  from holding Vanguard Total Corporate or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fidelity High Yield  vs.  Vanguard Total Corporate

Fidelity High Yield

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity High Yield are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Fidelity High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total Corporate

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Corporate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidelity High and Vanguard Total

The main advantage of trading using opposite Fidelity High and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity High position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.

The idea behind Fidelity High Yield and Vanguard Total Corporate 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.