Correlation Between Fidelity Freedom and Fidelity Zero

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

By analyzing existing cross correlation between Fidelity Freedom 2015 and Fidelity Zero Extended, you can compare the effects of market volatilities on Fidelity Freedom and Fidelity Zero 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 Fidelity Zero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Fidelity Zero.

Diversification Opportunities for Fidelity Freedom and Fidelity Zero

0.95

Correlation Coefficient

Fidelity Freedom  Fidelity Zero

Almost no diversification

The 3 months correlation between Fidelity and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom 2015 and Fidelity Zero Extended in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Zero Extended 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 2015 are associated (or correlated) with Fidelity Zero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Zero Extended has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Fidelity Zero go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Fidelity Zero

Assuming the 90 days horizon Fidelity Freedom is expected to generate 2.84 times less return on investment than Fidelity Zero. But when comparing it to its historical volatility, Fidelity Freedom 2015 is 3.52 times less risky than Fidelity Zero. It trades about 0.26 of its potential returns per unit of risk. Fidelity Zero Extended is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,246  in Fidelity Zero Extended on May 1, 2025 and sell it today you would earn a total of  178.00  from holding Fidelity Zero Extended or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Fidelity Freedom 2015  vs.  Fidelity Zero Extended

Fidelity Freedom 2015

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom 2015 are ranked lower than 20 (%) 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.

Fidelity Zero Extended

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Zero Extended are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Zero showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Freedom and Fidelity Zero

The main advantage of trading using opposite Fidelity Freedom and Fidelity Zero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Fidelity Zero 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 Zero will offset losses from the drop in Fidelity Zero's long position.

The idea behind Fidelity Freedom 2015 and Fidelity Zero Extended 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.