Correlation Between Fidelity Freedom and State Street
Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom 2040 and State Street Target, you can compare the effects of market volatilities on Fidelity Freedom and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and State Street.
Diversification Opportunities for Fidelity Freedom and State Street
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and State is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom 2040 and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 2040 are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and State Street go up and down completely randomly.
Pair Corralation between Fidelity Freedom and State Street
Assuming the 90 days horizon Fidelity Freedom 2040 is expected to generate 1.05 times more return on investment than State Street. However, Fidelity Freedom is 1.05 times more volatile than State Street Target. It trades about 0.08 of its potential returns per unit of risk. State Street Target is currently generating about 0.08 per unit of risk. If you would invest 943.00 in Fidelity Freedom 2040 on September 1, 2024 and sell it today you would earn a total of 270.00 from holding Fidelity Freedom 2040 or generate 28.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
Fidelity Freedom 2040 vs. State Street Target
Performance |
| Timeline |
| Fidelity Freedom 2040 |
| State Street Target |
Fidelity Freedom and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Freedom and State Street
The main advantage of trading using opposite Fidelity Freedom and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Fidelity Freedom vs. Fidelity Freedom 2030 | Fidelity Freedom vs. Fidelity Freedom 2010 | Fidelity Freedom vs. Fidelity Freedom Income | Fidelity Freedom vs. Fidelity Freedom 2020 |
| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. State Street Target |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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