Correlation Between Fidelity Freedom and Fidelity Global

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

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

Diversification Opportunities for Fidelity Freedom and Fidelity Global

0.37

Correlation Coefficient

Fidelity Freedom  Fidelity Global

Weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Index and Fidelity Global Modity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Global Modity and Fidelity Freedom 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 Fidelity Freedom Index are associated (or correlated) with Fidelity Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Global Modity has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Fidelity Global go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Fidelity Global

Assuming the 90 days horizon Fidelity Freedom is expected to generate 2.38 times less return on investment than Fidelity Global. But when comparing it to its historical volatility, Fidelity Freedom Index is 2.44 times less risky than Fidelity Global. It trades about 0.08 of its potential returns per unit of risk. Fidelity Global Modity is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,837  in Fidelity Global Modity on September 12, 2024 and sell it today you would earn a total of  78.00  from holding Fidelity Global Modity or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fidelity Freedom Index  vs.  Fidelity Global Modity

Fidelity Freedom Index

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom Index are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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.

Fidelity Global Modity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Global Modity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Freedom and Fidelity Global

The main advantage of trading using opposite Fidelity Freedom and Fidelity Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Fidelity Global 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 Global will offset losses from the drop in Fidelity Global's long position.

The idea behind Fidelity Freedom Index and Fidelity Global Modity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.