Correlation Between Dana Large and Fidelity Freedom

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

By analyzing existing cross correlation between Dana Large Cap and Fidelity Freedom 2040, you can compare the effects of market volatilities on Dana Large 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 Dana Large with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana Large and Fidelity Freedom.

Diversification Opportunities for Dana Large and Fidelity Freedom

0.48

Correlation Coefficient

Dana Large  Fidelity Freedom

Very weak diversification

The 3 months correlation between Dana and Fidelity is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap 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 Dana Large 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 Dana Large 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 2040 has no effect on the direction of Dana Large i.e., Dana Large and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Dana Large and Fidelity Freedom

Assuming the 90 days horizon Dana Large Cap is expected to under-perform the Fidelity Freedom. In addition to that, Dana Large is 4.16 times more volatile than Fidelity Freedom 2040. It trades about -0.09 of its total potential returns per unit of risk. Fidelity Freedom 2040 is currently generating about -0.04 per unit of volatility. If you would invest  1,213  in Fidelity Freedom 2040 on September 30, 2024 and sell it today you would lose (19.00) from holding Fidelity Freedom 2040 or give up 1.57% of portfolio value over 90 days.

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

Dana Large Cap  vs.  Fidelity Freedom 2040

Dana Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fidelity Freedom 2040

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Freedom 2040 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 Dana Large and Fidelity Freedom

The main advantage of trading using opposite Dana Large and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana Large 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 Dana Large Cap and Fidelity Freedom 2040 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.