Correlation Between General American and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both General American 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 General American and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General American Investors and Fidelity Freedom 2030, you can compare the effects of market volatilities on General American 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 General American with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and Fidelity Freedom.
Diversification Opportunities for General American and Fidelity Freedom
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between General and Fidelity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Fidelity Freedom 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2030 and General American 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 General American Investors 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 2030 has no effect on the direction of General American i.e., General American and Fidelity Freedom go up and down completely randomly.
Pair Corralation between General American and Fidelity Freedom
Assuming the 90 days horizon General American Investors is expected to generate 1.5 times more return on investment than Fidelity Freedom. However, General American is 1.5 times more volatile than Fidelity Freedom 2030. It trades about -0.08 of its potential returns per unit of risk. Fidelity Freedom 2030 is currently generating about -0.22 per unit of risk. If you would invest 5,629 in General American Investors on January 26, 2024 and sell it today you would lose (75.00) from holding General American Investors or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General American Investors vs. Fidelity Freedom 2030
Performance |
| Timeline |
| General American Inv |
| Fidelity Freedom 2030 |
General American and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General American and Fidelity Freedom
The main advantage of trading using opposite General American and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American 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.| General American vs. Vanguard Total Stock | General American vs. Vanguard 500 Index | General American vs. Vanguard Total Stock | General American vs. Vanguard Total Stock |
| Fidelity Freedom vs. Vanguard Target Retirement | Fidelity Freedom vs. American Funds 2030 | Fidelity Freedom vs. American Funds 2030 | Fidelity Freedom vs. Fidelity Freedom 2030 |
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 the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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