Correlation Between Inflation Adjusted and Fidelity Freedom

Can any of the company-specific risk be diversified away by investing in both Inflation Adjusted 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 Inflation Adjusted and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inflation Adjusted Bond Fund and Fidelity Freedom 2020, you can compare the effects of market volatilities on Inflation Adjusted 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 Inflation Adjusted with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Adjusted and Fidelity Freedom.

Diversification Opportunities for Inflation Adjusted and Fidelity Freedom

0.9

Correlation Coefficient

Inflation Adjusted  Fidelity Freedom

Almost no diversification

The 3 months correlation between Inflation and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Adjusted Bond Fund and Fidelity Freedom 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2020 and Inflation Adjusted 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 Inflation Adjusted Bond Fund 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 2020 has no effect on the direction of Inflation Adjusted i.e., Inflation Adjusted and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Inflation Adjusted and Fidelity Freedom

If you would invest  1,462  in Fidelity Freedom 2020 on October 27, 2024 and sell it today you would lose (1.00) from holding Fidelity Freedom 2020 or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Inflation Adjusted Bond Fund  vs.  Fidelity Freedom 2020

Inflation Adjusted Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inflation Adjusted Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Inflation Adjusted is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom 2020

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Freedom 2020 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inflation Adjusted and Fidelity Freedom

The main advantage of trading using opposite Inflation Adjusted and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Adjusted 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 Inflation Adjusted Bond Fund and Fidelity Freedom 2020 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.