Correlation Between Legg Mason and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Legg Mason 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 Legg Mason and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Fidelity Freedom 2035, you can compare the effects of market volatilities on Legg Mason 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 Legg Mason with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Fidelity Freedom.
Diversification Opportunities for Legg Mason and Fidelity Freedom
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Fidelity is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Fidelity Freedom 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2035 and Legg Mason 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 Legg Mason Partners 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 2035 has no effect on the direction of Legg Mason i.e., Legg Mason and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Legg Mason and Fidelity Freedom
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.21 times less return on investment than Fidelity Freedom. In addition to that, Legg Mason is 2.01 times more volatile than Fidelity Freedom 2035. It trades about 0.03 of its total potential returns per unit of risk. Fidelity Freedom 2035 is currently generating about 0.08 per unit of volatility. If you would invest 1,283 in Fidelity Freedom 2035 on August 31, 2024 and sell it today you would earn a total of 360.00 from holding Fidelity Freedom 2035 or generate 28.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Fidelity Freedom 2035
Performance |
| Timeline |
| Legg Mason Partners |
| Fidelity Freedom 2035 |
Legg Mason and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Fidelity Freedom
The main advantage of trading using opposite Legg Mason and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason 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.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| Fidelity Freedom vs. Artisan Small Cap | Fidelity Freedom vs. Legg Mason Partners | Fidelity Freedom vs. Tfa Alphagen Growth | Fidelity Freedom vs. Touchstone Small Cap |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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