Correlation Between Prudential Core and Fidelity Freedom

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

By analyzing existing cross correlation between Prudential Core Conservative and Fidelity Freedom 2015, you can compare the effects of market volatilities on Prudential Core 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 Prudential Core with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and Fidelity Freedom.

Diversification Opportunities for Prudential Core and Fidelity Freedom

0.72

Correlation Coefficient

Prudential Core  Fidelity Freedom

Poor diversification

The 3 months correlation between Prudential and Fidelity is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and Fidelity Freedom 2015 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2015 and Prudential Core 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 Prudential Core Conservative 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 2015 has no effect on the direction of Prudential Core i.e., Prudential Core and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Prudential Core and Fidelity Freedom

Assuming the 90 days horizon Prudential Core Conservative is expected to generate 0.78 times more return on investment than Fidelity Freedom. However, Prudential Core Conservative is 1.29 times less risky than Fidelity Freedom. It trades about 0.15 of its potential returns per unit of risk. Fidelity Freedom 2015 is currently generating about 0.06 per unit of risk. If you would invest  839.00  in Prudential Core Conservative on December 24, 2024 and sell it today you would earn a total of  23.00  from holding Prudential Core Conservative or generate 2.74% return on investment over 90 days.

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

Prudential Core Conservative  vs.  Fidelity Freedom 2015

Prudential Core Cons

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Core Conservative are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom 2015

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2015 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 Prudential Core and Fidelity Freedom

The main advantage of trading using opposite Prudential Core and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core 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 Prudential Core Conservative and Fidelity Freedom 2015 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.