Correlation Between Fidelity Flex and Fidelity Freedom

Can any of the company-specific risk be diversified away by investing in both Fidelity Flex 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 Flex 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 Flex Servative and Fidelity Freedom 2030, you can compare the effects of market volatilities on Fidelity Flex 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 Flex with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Flex and Fidelity Freedom.

Diversification Opportunities for Fidelity Flex and Fidelity Freedom

0.45

Correlation Coefficient

Fidelity Flex  Fidelity Freedom

Very weak diversification

The 3 months correlation between Fidelity and Fidelity is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Flex Servative and Fidelity Freedom 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2030 and Fidelity Flex 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 Flex Servative 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 2030 has no effect on the direction of Fidelity Flex i.e., Fidelity Flex and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Fidelity Flex and Fidelity Freedom

Assuming the 90 days horizon Fidelity Flex is expected to generate 1.3 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Fidelity Flex Servative is 8.71 times less risky than Fidelity Freedom. It trades about 0.22 of its potential returns per unit of risk. Fidelity Freedom 2030 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,767  in Fidelity Freedom 2030 on December 23, 2024 and sell it today you would earn a total of  19.00  from holding Fidelity Freedom 2030 or generate 1.08% return on investment over 90 days.

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

Fidelity Flex Servative  vs.  Fidelity Freedom 2030

Fidelity Flex Servative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Flex Servative are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fidelity Flex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom 2030

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2030 are ranked lower than 2 (%) 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 Flex and Fidelity Freedom

The main advantage of trading using opposite Fidelity Flex and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Flex 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 Flex Servative and Fidelity Freedom 2030 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.