Correlation Between Barings Emerging and Fidelity Freedom

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

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

Diversification Opportunities for Barings Emerging and Fidelity Freedom

0.3

Correlation Coefficient

Barings Emerging  Fidelity Freedom

Weak diversification

The 3 months correlation between Barings and Fidelity is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets 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 Barings Emerging 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 Barings Emerging Markets 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 Barings Emerging i.e., Barings Emerging and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Barings Emerging and Fidelity Freedom

Assuming the 90 days horizon Barings Emerging Markets is expected to generate 0.32 times more return on investment than Fidelity Freedom. However, Barings Emerging Markets is 3.14 times less risky than Fidelity Freedom. It trades about 0.26 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.01 per unit of risk. If you would invest  729.00  in Barings Emerging Markets on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Barings Emerging Markets or generate 4.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Barings Emerging Markets  vs.  Fidelity Freedom Index

Barings Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Emerging Markets are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Barings Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Freedom Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, 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 Barings Emerging and Fidelity Freedom

The main advantage of trading using opposite Barings Emerging and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Emerging 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 Barings Emerging Markets 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.