Correlation Between Oil Equipment and Fidelity Freedom

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

By analyzing existing cross correlation between Oil Equipment Services and Fidelity Freedom 2060, you can compare the effects of market volatilities on Oil Equipment 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 Oil Equipment with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Equipment and Fidelity Freedom.

Diversification Opportunities for Oil Equipment and Fidelity Freedom

0.47

Correlation Coefficient

Oil Equipment  Fidelity Freedom

Very weak diversification

The 3 months correlation between Oil and Fidelity is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Oil Equipment Services and Fidelity Freedom 2060 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2060 and Oil Equipment 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 Oil Equipment Services 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 2060 has no effect on the direction of Oil Equipment i.e., Oil Equipment and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Oil Equipment and Fidelity Freedom

Assuming the 90 days horizon Oil Equipment Services is expected to generate 3.2 times more return on investment than Fidelity Freedom. However, Oil Equipment is 3.2 times more volatile than Fidelity Freedom 2060. It trades about 0.1 of its potential returns per unit of risk. Fidelity Freedom 2060 is currently generating about 0.08 per unit of risk. If you would invest  10,045  in Oil Equipment Services on March 4, 2024 and sell it today you would earn a total of  1,304  from holding Oil Equipment Services or generate 12.98% return on investment over 90 days.

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

Oil Equipment Services  vs.  Fidelity Freedom 2060

Oil Equipment Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Equipment Services are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oil Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Freedom 2060

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2060 are ranked lower than 5 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oil Equipment and Fidelity Freedom

The main advantage of trading using opposite Oil Equipment and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Equipment 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 Oil Equipment Services and Fidelity Freedom 2060 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.