Correlation Between Fidelity Freedom and Vanguard Target
Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Vanguard Target 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 Vanguard Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom Income and Vanguard Target Retirement, you can compare the effects of market volatilities on Fidelity Freedom and Vanguard Target 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 Vanguard Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Vanguard Target.
Diversification Opportunities for Fidelity Freedom and Vanguard Target
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Income and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Income are associated (or correlated) with Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Vanguard Target go up and down completely randomly.
Pair Corralation between Fidelity Freedom and Vanguard Target
Assuming the 90 days horizon Fidelity Freedom Income is expected to generate 1.11 times more return on investment than Vanguard Target. However, Fidelity Freedom is 1.11 times more volatile than Vanguard Target Retirement. It trades about 0.06 of its potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.04 per unit of risk. If you would invest 1,076 in Fidelity Freedom Income on August 28, 2024 and sell it today you would earn a total of 4.00 from holding Fidelity Freedom Income or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fidelity Freedom Income vs. Vanguard Target Retirement
Performance |
| Timeline |
| Fidelity Freedom Income |
| Vanguard Target Reti |
Fidelity Freedom and Vanguard Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Freedom and Vanguard Target
The main advantage of trading using opposite Fidelity Freedom and Vanguard Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Vanguard Target 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 Vanguard Target will offset losses from the drop in Vanguard Target's long position.| Fidelity Freedom vs. Short Duration Inflation | Fidelity Freedom vs. Lord Abbett Inflation | Fidelity Freedom vs. Federated Hermes Inflation | Fidelity Freedom vs. Ab Bond Inflation |
| Vanguard Target vs. Vanguard Materials Index | Vanguard Target vs. Vanguard Limited Term Tax Exempt | Vanguard Target vs. Vanguard Limited Term Tax Exempt | Vanguard Target vs. Vanguard Global Minimum |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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