Correlation Between Vanguard Emerging and Fidelity Series

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

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

Diversification Opportunities for Vanguard Emerging and Fidelity Series

0.99

Correlation Coefficient

Vanguard Emerging  Fidelity Series

No risk reduction

The 3 months correlation between Vanguard and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Fidelity Series Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series Emerging and Vanguard Emerging 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 Emerging Markets are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series Emerging has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Fidelity Series go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Fidelity Series

Assuming the 90 days horizon Vanguard Emerging is expected to generate 1.28 times less return on investment than Fidelity Series. But when comparing it to its historical volatility, Vanguard Emerging Markets is 1.3 times less risky than Fidelity Series. It trades about 0.11 of its potential returns per unit of risk. Fidelity Series Emerging is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,739  in Fidelity Series Emerging on January 30, 2024 and sell it today you would earn a total of  62.00  from holding Fidelity Series Emerging or generate 3.57% return on investment over 90 days.

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

Vanguard Emerging Markets  vs.  Fidelity Series Emerging

Vanguard Emerging Markets

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vanguard Emerging may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Fidelity Series Emerging

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Emerging are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Series may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Vanguard Emerging and Fidelity Series

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

The idea behind Vanguard Emerging Markets and Fidelity Series Emerging 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.