Correlation Between Fidelity Municipal and Vanguard High-yield
Can any of the company-specific risk be diversified away by investing in both Fidelity Municipal and Vanguard High-yield 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 Municipal and Vanguard High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Municipal Income and Vanguard High Yield Tax Exempt, you can compare the effects of market volatilities on Fidelity Municipal and Vanguard High-yield 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 Municipal with a short position of Vanguard High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Municipal and Vanguard High-yield.
Diversification Opportunities for Fidelity Municipal and Vanguard High-yield
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Vanguard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and Vanguard High Yield Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield and Fidelity Municipal 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 Municipal Income are associated (or correlated) with Vanguard High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and Vanguard High-yield go up and down completely randomly.
Pair Corralation between Fidelity Municipal and Vanguard High-yield
Assuming the 90 days horizon Fidelity Municipal Income is expected to under-perform the Vanguard High-yield. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Municipal Income is 1.08 times less risky than Vanguard High-yield. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Vanguard High Yield Tax Exempt is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 1,067 in Vanguard High Yield Tax Exempt on January 17, 2024 and sell it today you would lose (9.00) from holding Vanguard High Yield Tax Exempt or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fidelity Municipal Income vs. Vanguard High Yield Tax Exempt
Performance |
| Timeline |
| Fidelity Municipal |
| Vanguard High Yield |
Fidelity Municipal and Vanguard High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Municipal and Vanguard High-yield
The main advantage of trading using opposite Fidelity Municipal and Vanguard High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Municipal position performs unexpectedly, Vanguard High-yield 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 High-yield will offset losses from the drop in Vanguard High-yield's long position.| Fidelity Municipal vs. Fidelity Freedom 2015 | Fidelity Municipal vs. Fidelity Puritan Fund | Fidelity Municipal vs. Fidelity Puritan Fund | Fidelity Municipal vs. Fidelity Pennsylvania Municipal |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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