Correlation Between Fidelity Capital and Fidelity Freedom

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

By analyzing existing cross correlation between Fidelity Capital Income and Fidelity Freedom 2035, you can compare the effects of market volatilities on Fidelity Capital 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 Fidelity Capital with a short position of Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Capital and Fidelity Freedom.

Diversification Opportunities for Fidelity Capital and Fidelity Freedom

0.96

Correlation Coefficient

Fidelity Capital  Fidelity Freedom

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Capital Income and Fidelity Freedom 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2035 and Fidelity Capital 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 Capital Income 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 2035 has no effect on the direction of Fidelity Capital i.e., Fidelity Capital and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Fidelity Capital and Fidelity Freedom

Assuming the 90 days horizon Fidelity Capital is expected to generate 1.72 times less return on investment than Fidelity Freedom. But when comparing it to its historical volatility, Fidelity Capital Income is 1.85 times less risky than Fidelity Freedom. It trades about 0.17 of its potential returns per unit of risk. Fidelity Freedom 2035 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,462  in Fidelity Freedom 2035 on February 19, 2024 and sell it today you would earn a total of  84.00  from holding Fidelity Freedom 2035 or generate 5.75% return on investment over 90 days.

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

Fidelity Capital Income  vs.  Fidelity Freedom 2035

Fidelity Capital Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Capital Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom 2035

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2035 are ranked lower than 12 (%) 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 Fidelity Capital and Fidelity Freedom

The main advantage of trading using opposite Fidelity Capital and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Capital 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 Fidelity Capital Income and Fidelity Freedom 2035 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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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.