Correlation Between Fidelity Freedom and American Fds

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Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and American Fds 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 Freedom and American Fds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom 2010 and American Fds 2010, you can compare the effects of market volatilities on Fidelity Freedom and American Fds 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 Freedom with a short position of American Fds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and American Fds.

Diversification Opportunities for Fidelity Freedom and American Fds

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Fidelity and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom 2010 and American Fds 2010 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Fds 2010 and Fidelity Freedom 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 Freedom 2010 are associated (or correlated) with American Fds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Fds 2010 has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and American Fds go up and down completely randomly.

Pair Corralation between Fidelity Freedom and American Fds

Assuming the 90 days horizon Fidelity Freedom 2010 is expected to under-perform the American Fds. In addition to that, Fidelity Freedom is 1.02 times more volatile than American Fds 2010. It trades about -0.02 of its total potential returns per unit of risk. American Fds 2010 is currently generating about 0.0 per unit of volatility. If you would invest  1,125  in American Fds 2010 on August 30, 2022 and sell it today you would earn a total of  0.00  from holding American Fds 2010 or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Fidelity Freedom 2010  vs.  American Fds 2010

 Performance (%) 
       Timeline  
Fidelity Freedom 2010 
Fidelity Performance
0 of 100
Over the last 90 days Fidelity Freedom 2010 has generated negative risk-adjusted returns adding no value to fund investors. 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.

Fidelity Price Channel

American Fds 2010 
American Performance
0 of 100
Over the last 90 days American Fds 2010 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Fds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

Fidelity Freedom and American Fds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Freedom and American Fds

The main advantage of trading using opposite Fidelity Freedom and American Fds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, American Fds 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 American Fds will offset losses from the drop in American Fds' long position.
Fidelity Freedom vs. American Fds 2010
Fidelity Freedom vs. American Fds 2010
Fidelity Freedom vs. American Fds 2010
Fidelity Freedom vs. American Fds 2010
The idea behind Fidelity Freedom 2010 and American Fds 2010 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.
American Fds vs. American Fds 2010
American Fds vs. American Fds 2010
American Fds vs. American Fds 2010
American Fds vs. American Fds 2010
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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