Correlation Between Small Cap and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Small Cap and Fidelity Freedom 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 Small Cap and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Fidelity Freedom Index, you can compare the effects of market volatilities on Small Cap and Fidelity Freedom 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 Small Cap with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Fidelity Freedom.
Diversification Opportunities for Small Cap and Fidelity Freedom
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Small and Fidelity is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Fidelity Freedom Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom Index and Small Cap 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 Small Cap Equity are associated (or correlated) with Fidelity Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom Index has no effect on the direction of Small Cap i.e., Small Cap and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Small Cap and Fidelity Freedom
Assuming the 90 days horizon Small Cap Equity is expected to generate 2.58 times more return on investment than Fidelity Freedom. However, Small Cap is 2.58 times more volatile than Fidelity Freedom Index. It trades about 0.05 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.09 per unit of risk. If you would invest 1,529 in Small Cap Equity on September 5, 2024 and sell it today you would earn a total of 506.00 from holding Small Cap Equity or generate 33.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Small Cap Equity vs. Fidelity Freedom Index
Performance |
| Timeline |
| Small Cap Equity |
| Fidelity Freedom Index |
Small Cap and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Fidelity Freedom
The main advantage of trading using opposite Small Cap and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Fidelity Freedom 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 Freedom will offset losses from the drop in Fidelity Freedom's long position.| Small Cap vs. Lind Capital Partners | Small Cap vs. Cs 607 Tax | Small Cap vs. Pace Municipal Fixed | Small Cap vs. Federated Pennsylvania Municipal |
| Fidelity Freedom vs. Fidelity Income Replacement | Fidelity Freedom vs. Fidelity Income Replacement | Fidelity Freedom vs. Fidelity Income Replacement | Fidelity Freedom vs. Fidelity Income Replacement |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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