Correlation Between Absolute Convertible and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible 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 Absolute Convertible and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Fidelity Freedom Index, you can compare the effects of market volatilities on Absolute Convertible 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 Absolute Convertible with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Fidelity Freedom.
Diversification Opportunities for Absolute Convertible and Fidelity Freedom
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Fidelity Freedom Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom Index and Absolute Convertible 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 Absolute Convertible Arbitrage 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 Index has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Absolute Convertible and Fidelity Freedom
Assuming the 90 days horizon Absolute Convertible is expected to generate 3.05 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 10.7 times less risky than Fidelity Freedom. It trades about 0.37 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,587 in Fidelity Freedom Index on September 12, 2024 and sell it today you would earn a total of 673.00 from holding Fidelity Freedom Index or generate 42.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Fidelity Freedom Index
Performance |
| Timeline |
| Absolute Convertible |
| Fidelity Freedom Index |
Absolute Convertible and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Fidelity Freedom
The main advantage of trading using opposite Absolute Convertible and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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.| Absolute Convertible vs. Vy Goldman Sachs | Absolute Convertible vs. Invesco Gold Special | Absolute Convertible vs. Short Precious Metals | Absolute Convertible vs. Franklin Gold Precious |
| Fidelity Freedom vs. Vanguard Target Retirement | Fidelity Freedom vs. Fidelity Freedom 2055 | Fidelity Freedom vs. Aquagold International | Fidelity Freedom vs. Morningstar Unconstrained Allocation |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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