Correlation Between Western Asset and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Inflation and Fidelity Freedom Index, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Fidelity Freedom.
Diversification Opportunities for Western Asset and Fidelity Freedom
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Fidelity is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation 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 Western Asset 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 Western Asset Inflation 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 Western Asset i.e., Western Asset and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Western Asset and Fidelity Freedom
Assuming the 90 days horizon Western Asset is expected to generate 4.71 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Western Asset Inflation is 1.69 times less risky than Fidelity Freedom. It trades about 0.1 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,508 in Fidelity Freedom Index on September 3, 2024 and sell it today you would earn a total of 77.00 from holding Fidelity Freedom Index or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Inflation vs. Fidelity Freedom Index
Performance |
| Timeline |
| Western Asset Inflation |
| Fidelity Freedom Index |
Western Asset and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Fidelity Freedom
The main advantage of trading using opposite Western Asset and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Blackrock Sm Cap | Western Asset vs. Principal Lifetime Hybrid | Western Asset vs. Adams Diversified Equity | Western Asset vs. Lord Abbett Diversified |
| Fidelity Freedom vs. T Rowe Price | Fidelity Freedom vs. T Rowe Price | Fidelity Freedom vs. T Rowe Price | Fidelity Freedom vs. T Rowe Price |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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