Correlation Between Fidelity International and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Fidelity International 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 Fidelity International and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity International Discovery and Fidelity Freedom Index, you can compare the effects of market volatilities on Fidelity International 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 Fidelity International with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity International and Fidelity Freedom.
Diversification Opportunities for Fidelity International and Fidelity Freedom
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Fidelity is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International Discove 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 Fidelity International 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 International Discovery 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 Fidelity International i.e., Fidelity International and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Fidelity International and Fidelity Freedom
Assuming the 90 days horizon Fidelity International Discovery is expected to generate 1.57 times more return on investment than Fidelity Freedom. However, Fidelity International is 1.57 times more volatile than Fidelity Freedom Index. It trades about 0.22 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about -0.03 per unit of risk. If you would invest 4,767 in Fidelity International Discovery on October 24, 2024 and sell it today you would earn a total of 156.00 from holding Fidelity International Discovery or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity International Discove vs. Fidelity Freedom Index
Performance |
| Timeline |
| Fidelity International |
| Fidelity Freedom Index |
Fidelity International and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity International and Fidelity Freedom
The main advantage of trading using opposite Fidelity International and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity International 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.The idea behind Fidelity International Discovery and Fidelity Freedom Index 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.
| Fidelity Freedom vs. Fidelity Freedom Index | Fidelity Freedom vs. Fidelity Freedom Index | Fidelity Freedom vs. Fidelity Freedom Index | Fidelity Freedom vs. Fidelity Freedom Index |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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