Correlation Between World Energy and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both World Energy and Fidelity Freedom 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 World Energy and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Fidelity Freedom 2050, you can compare the effects of market volatilities on World Energy and Fidelity Freedom 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 World Energy with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Fidelity Freedom.
Diversification Opportunities for World Energy and Fidelity Freedom
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between World and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Fidelity Freedom 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2050 and World Energy 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 World Energy Fund are associated (or correlated) with Fidelity Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom 2050 has no effect on the direction of World Energy i.e., World Energy and Fidelity Freedom go up and down completely randomly.
Pair Corralation between World Energy and Fidelity Freedom
Assuming the 90 days horizon World Energy Fund is expected to generate 1.73 times more return on investment than Fidelity Freedom. However, World Energy is 1.73 times more volatile than Fidelity Freedom 2050. It trades about 0.22 of its potential returns per unit of risk. Fidelity Freedom 2050 is currently generating about 0.14 per unit of risk. If you would invest 1,309 in World Energy Fund on September 4, 2024 and sell it today you would earn a total of 219.00 from holding World Energy Fund or generate 16.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Fidelity Freedom 2050
Performance |
| Timeline |
| World Energy |
| Fidelity Freedom 2050 |
World Energy and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Fidelity Freedom
The main advantage of trading using opposite World Energy and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Fidelity Freedom 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 Freedom will offset losses from the drop in Fidelity Freedom's long position.| World Energy vs. Vanguard Financials Index | World Energy vs. 1919 Financial Services | World Energy vs. Fidelity Advisor Financial | World Energy vs. Blackrock Financial Institutions |
| Fidelity Freedom vs. Energy Basic Materials | Fidelity Freedom vs. Invesco Energy Fund | Fidelity Freedom vs. World Energy Fund | Fidelity Freedom vs. Energy Basic Materials |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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