Correlation Between FIDELITY FREEDOM and B of A

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Can any of the company-specific risk be diversified away by investing in both FIDELITY FREEDOM and B of A 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 B of A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIDELITY FREEDOM 2015 and Bank Of America, you can compare the effects of market volatilities on FIDELITY FREEDOM and B of A 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 B of A. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIDELITY FREEDOM and B of A.

Diversification Opportunities for FIDELITY FREEDOM and B of A

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between FIDELITY and B of A is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding FIDELITY FREEDOM 2015 and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America 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 2015 are associated (or correlated) with B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of FIDELITY FREEDOM i.e., FIDELITY FREEDOM and B of A go up and down completely randomly.

Pair Corralation between FIDELITY FREEDOM and B of A

Assuming the 90 days horizon FIDELITY FREEDOM 2015 is expected to generate 0.43 times more return on investment than B of A. However, FIDELITY FREEDOM 2015 is 2.34 times less risky than B of A. It trades about 0.27 of its potential returns per unit of risk. Bank Of America is currently generating about -0.29 per unit of risk. If you would invest  1,036  in FIDELITY FREEDOM 2015 on September 9, 2022 and sell it today you would earn a total of  51.00  from holding FIDELITY FREEDOM 2015 or generate 4.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

FIDELITY FREEDOM 2015  vs.  Bank Of America

 Performance (%) 
       Timeline  
FIDELITY FREEDOM 2015 
FIDELITY Performance
0 of 100
Over the last 90 days FIDELITY FREEDOM 2015 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, 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

Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

FIDELITY FREEDOM and B of A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FIDELITY FREEDOM and B of A

The main advantage of trading using opposite FIDELITY FREEDOM and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIDELITY FREEDOM position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
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The idea behind FIDELITY FREEDOM 2015 and Bank Of America 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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