Correlation Between Vanguard Target and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Vanguard Target 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 Vanguard Target and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Target Retirement and Fidelity Freedom 2040, you can compare the effects of market volatilities on Vanguard Target 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 Vanguard Target with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Fidelity Freedom.
Diversification Opportunities for Vanguard Target and Fidelity Freedom
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Fidelity Freedom 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2040 and Vanguard Target 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 Vanguard Target Retirement 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 2040 has no effect on the direction of Vanguard Target i.e., Vanguard Target and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Vanguard Target and Fidelity Freedom
Assuming the 90 days horizon Vanguard Target Retirement is expected to generate 0.84 times more return on investment than Fidelity Freedom. However, Vanguard Target Retirement is 1.19 times less risky than Fidelity Freedom. It trades about 0.11 of its potential returns per unit of risk. Fidelity Freedom 2040 is currently generating about 0.06 per unit of risk. If you would invest 4,466 in Vanguard Target Retirement on August 29, 2024 and sell it today you would earn a total of 55.00 from holding Vanguard Target Retirement or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Target Retirement vs. Fidelity Freedom 2040
Performance |
| Timeline |
| Vanguard Target Reti |
| Fidelity Freedom 2040 |
Vanguard Target and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and Fidelity Freedom
The main advantage of trading using opposite Vanguard Target and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target 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.| Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement |
| Fidelity Freedom vs. Fidelity Freedom 2015 | Fidelity Freedom vs. Fidelity Puritan Fund | Fidelity Freedom vs. Fidelity Puritan Fund | Fidelity Freedom vs. Fidelity Pennsylvania Municipal |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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