Correlation Between Fidelity Freedom and American Funds
Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and American Funds 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 Freedom and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom 2030 and American Funds 2030, you can compare the effects of market volatilities on Fidelity Freedom and American Funds 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 Freedom with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and American Funds.
Diversification Opportunities for Fidelity Freedom and American Funds
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom 2030 and American Funds 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2030 and Fidelity Freedom 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 Freedom 2030 are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2030 has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and American Funds go up and down completely randomly.
Pair Corralation between Fidelity Freedom and American Funds
Assuming the 90 days horizon Fidelity Freedom is expected to generate 1.22 times less return on investment than American Funds. But when comparing it to its historical volatility, Fidelity Freedom 2030 is 1.06 times less risky than American Funds. It trades about 0.08 of its potential returns per unit of risk. American Funds 2030 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,384 in American Funds 2030 on August 28, 2024 and sell it today you would earn a total of 410.00 from holding American Funds 2030 or generate 29.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Freedom 2030 vs. American Funds 2030
Performance |
| Timeline |
| Fidelity Freedom 2030 |
| American Funds 2030 |
Fidelity Freedom and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Freedom and American Funds
The main advantage of trading using opposite Fidelity Freedom and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Fidelity Freedom vs. Fidelity Freedom Index | Fidelity Freedom vs. Fidelity Freedom Index | Fidelity Freedom vs. Fidelity Freedom Index | Fidelity Freedom vs. Fidelity Freedom Index |
| American Funds vs. American Funds 2025 | American Funds vs. American Funds 2035 | American Funds vs. American Funds 2040 | American Funds vs. American Funds 2020 |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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