Correlation Between Fidelity Freedom and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Multimanager Lifestyle 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 Multimanager Lifestyle 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 Multimanager Lifestyle Aggressive, you can compare the effects of market volatilities on Fidelity Freedom and Multimanager Lifestyle 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 Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Multimanager Lifestyle.
Diversification Opportunities for Fidelity Freedom and Multimanager Lifestyle
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and MULTIMANAGER is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom 2040 and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Fidelity Freedom and Multimanager Lifestyle
Assuming the 90 days horizon Fidelity Freedom is expected to generate 1.1 times less return on investment than Multimanager Lifestyle. But when comparing it to its historical volatility, Fidelity Freedom 2040 is 1.1 times less risky than Multimanager Lifestyle. It trades about 0.15 of its potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,178 in Multimanager Lifestyle Aggressive on September 4, 2024 and sell it today you would earn a total of 381.00 from holding Multimanager Lifestyle Aggressive or generate 32.34% 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 2040 vs. Multimanager Lifestyle Aggress
Performance |
| Timeline |
| Fidelity Freedom 2040 |
| Multimanager Lifestyle |
Fidelity Freedom and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Freedom and Multimanager Lifestyle
The main advantage of trading using opposite Fidelity Freedom and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| Fidelity Freedom vs. Fidelity Advisor Financial | Fidelity Freedom vs. Financials Ultrasector Profund | Fidelity Freedom vs. Davis Financial Fund | Fidelity Freedom vs. Prudential Jennison Financial |
| Multimanager Lifestyle vs. Needham Aggressive Growth | Multimanager Lifestyle vs. Calvert High Yield | Multimanager Lifestyle vs. Siit High Yield | Multimanager Lifestyle vs. Victory High Income |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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