Correlation Between Quantitative Longshort and Fidelity Freedom

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

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

Diversification Opportunities for Quantitative Longshort and Fidelity Freedom

0.57

Correlation Coefficient

Quantitative Longshort  Fidelity Freedom

Very weak diversification

The 3 months correlation between Quantitative and Fidelity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity 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 Quantitative Longshort 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 Quantitative Longshort Equity 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 Quantitative Longshort i.e., Quantitative Longshort and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Quantitative Longshort and Fidelity Freedom

Assuming the 90 days horizon Quantitative Longshort is expected to generate 2.75 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Quantitative Longshort Equity is 1.31 times less risky than Fidelity Freedom. It trades about 0.04 of its potential returns per unit of risk. Fidelity Freedom 2040 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  905.00  in Fidelity Freedom 2040 on September 29, 2024 and sell it today you would earn a total of  289.00  from holding Fidelity Freedom 2040 or generate 31.93% return on investment over 90 days.

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

Quantitative Longshort Equity  vs.  Fidelity Freedom 2040

Quantitative Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Quantitative Longshort and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative Longshort 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 Quantitative Longshort Equity 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.