Correlation Between Fidelity Freedom and Vanguard Institutional

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Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Vanguard Institutional 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 Vanguard Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom 2020 and Vanguard Institutional Target, you can compare the effects of market volatilities on Fidelity Freedom and Vanguard Institutional 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 Vanguard Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Vanguard Institutional.

Diversification Opportunities for Fidelity Freedom and Vanguard Institutional

  Correlation Coefficient

Very weak diversification

The 24 months correlation between Fidelity and Vanguard is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom 2020 and Vanguard Institutional Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Institutional 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 2020 are associated (or correlated) with Vanguard Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Institutional has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Vanguard Institutional go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Vanguard Institutional

Assuming the 90 days horizon Fidelity Freedom is expected to generate 1.6 times less return on investment than Vanguard Institutional. In addition to that, Fidelity Freedom is 1.49 times more volatile than Vanguard Institutional Target. It trades about 0.02 of its total potential returns per unit of risk. Vanguard Institutional Target is currently generating about 0.05 per unit of volatility. If you would invest  2,365  in Vanguard Institutional Target on March 28, 2022 and sell it today you would earn a total of  204.00  from holding Vanguard Institutional Target or generate 8.63% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Fidelity Freedom 2020  vs.  Vanguard Institutional Target

 Performance (%) 
Fidelity Freedom 2020 
Fidelity Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2020 are ranked lower than 1 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Price Channel

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

Fidelity Freedom and Vanguard Institutional Volatility Contrast

 Predicted Return Density 

Pair Trading with Fidelity Freedom and Vanguard Institutional

The main advantage of trading using opposite Fidelity Freedom and Vanguard Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Vanguard Institutional 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 Vanguard Institutional will offset losses from the drop in Vanguard Institutional's long position.

Fidelity Freedom 2020

Pair trading matchups for Fidelity Freedom

The idea behind Fidelity Freedom 2020 and Vanguard Institutional Target 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.

Vanguard Institutional Target

Pair trading matchups for Vanguard Institutional

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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