Correlation Between Balanced Fund and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Balanced Fund 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 Balanced Fund and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and Fidelity Freedom 2045, you can compare the effects of market volatilities on Balanced Fund 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 Balanced Fund with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Fidelity Freedom.
Diversification Opportunities for Balanced Fund and Fidelity Freedom
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and FIDELITY is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Fidelity Freedom 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2045 and Balanced Fund 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 Balanced Fund Investor 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 2045 has no effect on the direction of Balanced Fund i.e., Balanced Fund and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Balanced Fund and Fidelity Freedom
Assuming the 90 days horizon Balanced Fund is expected to generate 1.15 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Balanced Fund Investor is 1.35 times less risky than Fidelity Freedom. It trades about 0.1 of its potential returns per unit of risk. Fidelity Freedom 2045 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,083 in Fidelity Freedom 2045 on September 1, 2024 and sell it today you would earn a total of 337.00 from holding Fidelity Freedom 2045 or generate 31.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
Balanced Fund Investor vs. Fidelity Freedom 2045
Performance |
| Timeline |
| Balanced Fund Investor |
| Fidelity Freedom 2045 |
Balanced Fund and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Fidelity Freedom
The main advantage of trading using opposite Balanced Fund and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund 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.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
| Fidelity Freedom vs. Fidelity Freedom 2050 | Fidelity Freedom vs. Fidelity Freedom 2005 | Fidelity Freedom vs. Fidelity Freedom 2035 | Fidelity Freedom vs. Fidelity Freedom 2015 |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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