Correlation Between Fidelity Freedom and State Farm

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Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and State Farm 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 State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Freedom Index and State Farm Growth, you can compare the effects of market volatilities on Fidelity Freedom and State Farm 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 State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and State Farm.

Diversification Opportunities for Fidelity Freedom and State Farm

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fidelity and State is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Index and State Farm Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Growth 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 Index are associated (or correlated) with State Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Farm Growth has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and State Farm go up and down completely randomly.

Pair Corralation between Fidelity Freedom and State Farm

Assuming the 90 days horizon Fidelity Freedom Index is expected to generate 0.4 times more return on investment than State Farm. However, Fidelity Freedom Index is 2.53 times less risky than State Farm. It trades about -0.2 of its potential returns per unit of risk. State Farm Growth is currently generating about -0.19 per unit of risk. If you would invest  1,265  in Fidelity Freedom Index on January 19, 2024 and sell it today you would lose (16.00) from holding Fidelity Freedom Index or give up 1.26% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Fidelity Freedom Index  vs.  State Farm Growth

 Performance 
       Timeline  
Fidelity Freedom Index 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fidelity Freedom Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
State Farm Growth 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in State Farm Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, State Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Freedom and State Farm Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Freedom and State Farm

The main advantage of trading using opposite Fidelity Freedom and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, State Farm 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 State Farm will offset losses from the drop in State Farm's long position.
The idea behind Fidelity Freedom Index and State Farm Growth 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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