Correlation Between Transamerica Intermediate and Fidelity Freedom

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

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

Diversification Opportunities for Transamerica Intermediate and Fidelity Freedom

0.41

Correlation Coefficient

Transamerica Intermediate  Fidelity Freedom

Very weak diversification

The 3 months correlation between Transamerica and Fidelity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Fidelity Freedom Blend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom Blend and Transamerica Intermediate 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 Transamerica Intermediate Muni 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 Blend has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Transamerica Intermediate and Fidelity Freedom

Assuming the 90 days horizon Transamerica Intermediate is expected to generate 1.44 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Transamerica Intermediate Muni is 1.51 times less risky than Fidelity Freedom. It trades about 0.04 of its potential returns per unit of risk. Fidelity Freedom Blend is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  924.00  in Fidelity Freedom Blend on October 15, 2024 and sell it today you would earn a total of  62.00  from holding Fidelity Freedom Blend or generate 6.71% return on investment over 90 days.

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

Transamerica Intermediate Muni  vs.  Fidelity Freedom Blend

Transamerica Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Freedom Blend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Freedom Blend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, 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 Transamerica Intermediate and Fidelity Freedom

The main advantage of trading using opposite Transamerica Intermediate and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Intermediate 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 Transamerica Intermediate Muni and Fidelity Freedom Blend 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.