Correlation Between Fidelity Freedom and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Fidelity Advisor 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 Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom Index and Fidelity Advisor Value, you can compare the effects of market volatilities on Fidelity Freedom and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Fidelity Advisor.
Diversification Opportunities for Fidelity Freedom and Fidelity Advisor
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Index and Fidelity Advisor Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Value 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 Index are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Value has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Fidelity Freedom and Fidelity Advisor
Assuming the 90 days horizon Fidelity Freedom is expected to generate 7.19 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Fidelity Freedom Index is 1.9 times less risky than Fidelity Advisor. It trades about 0.08 of its potential returns per unit of risk. Fidelity Advisor Value is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 5,212 in Fidelity Advisor Value on August 26, 2024 and sell it today you would earn a total of 415.00 from holding Fidelity Advisor Value or generate 7.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Freedom Index vs. Fidelity Advisor Value
Performance |
| Timeline |
| Fidelity Freedom Index |
| Fidelity Advisor Value |
Fidelity Freedom and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Freedom and Fidelity Advisor
The main advantage of trading using opposite Fidelity Freedom and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Fidelity Advisor 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 Advisor will offset losses from the drop in Fidelity Advisor's long position.| Fidelity Freedom vs. Vanguard Short Term Government | Fidelity Freedom vs. Inverse Government Long | Fidelity Freedom vs. Government Securities Fund | Fidelity Freedom vs. Ab Government Exchange |
| Fidelity Advisor vs. Fidelity Contrafund | Fidelity Advisor vs. Fidelity Diversified International | Fidelity Advisor vs. Fidelity Growth Pany | Fidelity Advisor vs. Fidelity Mid Cap Stock |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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