Correlation Between AQR LONG and Fidelity Freedom

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

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

Diversification Opportunities for AQR LONG and Fidelity Freedom

Very good diversification

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

Pair Corralation between AQR LONG and Fidelity Freedom

Assuming the 90 days horizon AQR LONG SHORT EQUITY is expected to generate 1.29 times more return on investment than Fidelity Freedom. However, AQR LONG is 1.29 times more volatile than Fidelity Freedom Index. It trades about 0.5 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.07 per unit of risk. If you would invest  1,454  in AQR LONG SHORT EQUITY on June 23, 2023 and sell it today you would earn a total of  57.00  from holding AQR LONG SHORT EQUITY or generate 3.92% return on investment over 90 days.

AQR LONG-SHORT EQUITY  vs.  Fidelity Freedom Index

AQR LONG-SHORT EQUITY

AQR Performance

35 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in AQR LONG SHORT EQUITY are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unfluctuating basic indicators, AQR LONG may actually be approaching a critical reversion point that can send shares even higher in October 2023.

Fidelity Freedom Index

Fidelity Performance

0 of 100

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AQR LONG and Fidelity Freedom

The main advantage of trading using opposite AQR LONG and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AQR LONG 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 AQR LONG SHORT EQUITY and Fidelity Freedom Index 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.