Correlation Between Fidelity Income and Fidelity Freedom

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

By analyzing existing cross correlation between Fidelity Income Replacement and Fidelity Freedom 2020, you can compare the effects of market volatilities on Fidelity Income 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 Fidelity Income with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Income and Fidelity Freedom.

Diversification Opportunities for Fidelity Income and Fidelity Freedom

0.94

Correlation Coefficient

Fidelity Income  Fidelity Freedom

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Income Replacement and Fidelity Freedom 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2020 and Fidelity Income 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 Income Replacement 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 2020 has no effect on the direction of Fidelity Income i.e., Fidelity Income and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Fidelity Income and Fidelity Freedom

Assuming the 90 days horizon Fidelity Income Replacement is expected to under-perform the Fidelity Freedom. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fidelity Income Replacement is 1.29 times less risky than Fidelity Freedom. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Fidelity Freedom 2020 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,509  in Fidelity Freedom 2020 on September 14, 2024 and sell it today you would earn a total of  6.00  from holding Fidelity Freedom 2020 or generate 0.4% return on investment over 90 days.

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

Fidelity Income Replacement  vs.  Fidelity Freedom 2020

Fidelity Income Repl

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Freedom 2020

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2020 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, 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 Fidelity Income and Fidelity Freedom

The main advantage of trading using opposite Fidelity Income and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Income 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 Fidelity Income Replacement and Fidelity Freedom 2020 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.