Correlation Between Cardinal Small and Fidelity Freedom

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

By analyzing existing cross correlation between Cardinal Small Cap and Fidelity Freedom 2065, you can compare the effects of market volatilities on Cardinal Small 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 Cardinal Small with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Small and Fidelity Freedom.

Diversification Opportunities for Cardinal Small and Fidelity Freedom

0.14

Correlation Coefficient

Cardinal Small  Fidelity Freedom

Average diversification

The 3 months correlation between Cardinal and Fidelity is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Small Cap and Fidelity Freedom 2065 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2065 and Cardinal Small 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 Cardinal Small Cap 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 2065 has no effect on the direction of Cardinal Small i.e., Cardinal Small and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Cardinal Small and Fidelity Freedom

Assuming the 90 days horizon Cardinal Small is expected to generate 1.04 times less return on investment than Fidelity Freedom. In addition to that, Cardinal Small is 1.05 times more volatile than Fidelity Freedom 2065. It trades about 0.05 of its total potential returns per unit of risk. Fidelity Freedom 2065 is currently generating about 0.05 per unit of volatility. If you would invest  1,305  in Fidelity Freedom 2065 on September 27, 2024 and sell it today you would earn a total of  68.00  from holding Fidelity Freedom 2065 or generate 5.21% return on investment over 90 days.

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

Cardinal Small Cap  vs.  Fidelity Freedom 2065

Cardinal Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Freedom 2065

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Freedom 2065 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental 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 Cardinal Small and Fidelity Freedom

The main advantage of trading using opposite Cardinal Small and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Small 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 Cardinal Small Cap and Fidelity Freedom 2065 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.