Correlation Between Fidelity Freedom and Fidelity Capital

Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Fidelity Capital 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 Capital 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 Capital Appreciation, you can compare the effects of market volatilities on Fidelity Freedom and Fidelity Capital 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 Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Fidelity Capital.

Diversification Opportunities for Fidelity Freedom and Fidelity Capital

0.65

Correlation Coefficient

Fidelity Freedom  Fidelity Capital

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Index and Fidelity Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Capital App 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 Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Capital App has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Fidelity Capital go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Fidelity Capital

Assuming the 90 days horizon Fidelity Freedom Index is expected to generate 0.7 times more return on investment than Fidelity Capital. However, Fidelity Freedom Index is 1.42 times less risky than Fidelity Capital. It trades about 0.0 of its potential returns per unit of risk. Fidelity Capital Appreciation is currently generating about -0.08 per unit of risk. If you would invest  2,635  in Fidelity Freedom Index on December 24, 2024 and sell it today you would lose (11.00) from holding Fidelity Freedom Index or give up 0.42% of portfolio value over 90 days.

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

Fidelity Freedom Index  vs.  Fidelity Capital Appreciation

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.

Fidelity Capital App

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Fidelity Freedom Index and Fidelity Capital Appreciation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.