Correlation Between Transamerica Intermediate and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Transamerica Intermediate 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 Transamerica Intermediate and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Intermediate Muni and Fidelity Freedom Index, you can compare the effects of market volatilities on Transamerica Intermediate 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 Transamerica Intermediate with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Intermediate and Fidelity Freedom.
Diversification Opportunities for Transamerica Intermediate and Fidelity Freedom
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Transamerica and Fidelity is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni 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 Transamerica Intermediate 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 Transamerica Intermediate Muni 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 Transamerica Intermediate i.e., Transamerica Intermediate and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Transamerica Intermediate and Fidelity Freedom
Assuming the 90 days horizon Transamerica Intermediate Muni is expected to generate 0.5 times more return on investment than Fidelity Freedom. However, Transamerica Intermediate Muni is 2.01 times less risky than Fidelity Freedom. It trades about 0.18 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.05 per unit of risk. If you would invest 1,071 in Transamerica Intermediate Muni on August 28, 2024 and sell it today you would earn a total of 13.00 from holding Transamerica Intermediate Muni or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Transamerica Intermediate Muni vs. Fidelity Freedom Index
Performance |
| Timeline |
| Transamerica Intermediate |
| Fidelity Freedom Index |
Transamerica Intermediate and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Intermediate and Fidelity Freedom
The main advantage of trading using opposite Transamerica Intermediate and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Intermediate 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.The idea behind Transamerica Intermediate Muni and Fidelity Freedom Index 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.
| Fidelity Freedom vs. Baird Strategic Municipal | Fidelity Freedom vs. Transamerica Intermediate Muni | Fidelity Freedom vs. T Rowe Price | Fidelity Freedom vs. Morningstar Municipal Bond |
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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