Correlation Between Fidelity Freedom and Fidelity Short-term

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

By analyzing existing cross correlation between Fidelity Freedom Blend and Fidelity Short Term Bond, you can compare the effects of market volatilities on Fidelity Freedom and Fidelity Short-term 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 Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Fidelity Short-term.

Diversification Opportunities for Fidelity Freedom and Fidelity Short-term

-0.7

Correlation Coefficient

Fidelity Freedom  Fidelity Short-term

Excellent diversification

The 3 months correlation between Fidelity and Fidelity is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Blend and Fidelity Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Short Term 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 Blend are associated (or correlated) with Fidelity Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Short Term has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Fidelity Short-term go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Fidelity Short-term

Assuming the 90 days horizon Fidelity Freedom Blend is expected to under-perform the Fidelity Short-term. In addition to that, Fidelity Freedom is 10.14 times more volatile than Fidelity Short Term Bond. It trades about -0.03 of its total potential returns per unit of risk. Fidelity Short Term Bond is currently generating about 0.23 per unit of volatility. If you would invest  983.00  in Fidelity Short Term Bond on January 30, 2025 and sell it today you would earn a total of  23.00  from holding Fidelity Short Term Bond or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fidelity Freedom Blend  vs.  Fidelity Short Term Bond

Fidelity Freedom Blend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Freedom Blend 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.

Fidelity Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Short Term Bond are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Short-term 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 Freedom and Fidelity Short-term

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

The idea behind Fidelity Freedom Blend and Fidelity Short Term Bond 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.