diversifiable risk of combining American Funds and Fidelity Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2010 and Fidelity Freedom 2010, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Fidelity Freedom.
Diversification Opportunities for American Funds and Fidelity Freedom
Pair Corralation between American Funds and Fidelity Freedom
Assuming the 90 days horizon American Funds is expected to generate 1.01 times less return on investment than Fidelity Freedom. In addition to that, American Funds is 1.02 times more volatile than Fidelity Freedom 2010. It trades about 0.22 of its total potential returns per unit of risk. Fidelity Freedom 2010 is currently generating about 0.23 per unit of volatility. If you would invest 1,354 in Fidelity Freedom 2010 on December 5, 2023 and sell it today you would earn a total of 22.00 from holding Fidelity Freedom 2010 or generate 1.62% return on investment over 90 days.
AMERICAN FUNDS 2010 vs. FIDELITY FREEDOM 2010
American Funds and Fidelity Freedom Volatility Contrast
Pair Trading with American Funds and Fidelity FreedomThe main advantage of trading using opposite American Funds and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 American Funds 2010 and Fidelity Freedom 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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