Correlation Between Fidelity Freedom and Fidelity

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Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Fidelity 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 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 Low Volatility, you can compare the effects of market volatilities on Fidelity Freedom and Fidelity 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Fidelity.

Diversification Opportunities for Fidelity Freedom and Fidelity

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Index and Fidelity Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Volatility 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Volatility has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Fidelity go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Fidelity

Assuming the 90 days horizon Fidelity Freedom is expected to generate 1.56 times less return on investment than Fidelity. But when comparing it to its historical volatility, Fidelity Freedom Index is 1.18 times less risky than Fidelity. It trades about 0.3 of its potential returns per unit of risk. Fidelity Low Volatility is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  1,225  in Fidelity Low Volatility on September 1, 2024 and sell it today you would earn a total of  69.00  from holding Fidelity Low Volatility or generate 5.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Fidelity Freedom Index  vs.  Fidelity Low Volatility

 Performance 
       Timeline  
Fidelity Freedom Index 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom Index are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Fidelity Low Volatility 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Volatility are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom and Fidelity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Freedom and Fidelity

The main advantage of trading using opposite Fidelity Freedom and Fidelity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Fidelity 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 will offset losses from the drop in Fidelity's long position.
The idea behind Fidelity Freedom Index and Fidelity Low Volatility 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.
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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