Correlation Between Fidelity Freedom and Materials Portfolio

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Can any of the company-specific risk be diversified away by investing in both Fidelity Freedom and Materials Portfolio 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 Materials Portfolio 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 Materials Portfolio Fidelity, you can compare the effects of market volatilities on Fidelity Freedom and Materials Portfolio 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 Materials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Freedom and Materials Portfolio.

Diversification Opportunities for Fidelity Freedom and Materials Portfolio

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fidelity and Materials is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Freedom Index and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio 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 Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Fidelity Freedom i.e., Fidelity Freedom and Materials Portfolio go up and down completely randomly.

Pair Corralation between Fidelity Freedom and Materials Portfolio

Assuming the 90 days horizon Fidelity Freedom is expected to generate 1.16 times less return on investment than Materials Portfolio. But when comparing it to its historical volatility, Fidelity Freedom Index is 1.54 times less risky than Materials Portfolio. It trades about 0.2 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,157  in Materials Portfolio Fidelity on September 6, 2024 and sell it today you would earn a total of  778.00  from holding Materials Portfolio Fidelity or generate 8.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Fidelity Freedom Index  vs.  Materials Portfolio Fidelity

 Performance 
       Timeline  
Fidelity Freedom Index 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom Index 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 Freedom may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Materials Portfolio 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Materials Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Freedom and Materials Portfolio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fidelity Freedom and Materials Portfolio

The main advantage of trading using opposite Fidelity Freedom and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Freedom position performs unexpectedly, Materials Portfolio 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 Materials Portfolio will offset losses from the drop in Materials Portfolio's long position.
The idea behind Fidelity Freedom Index and Materials Portfolio Fidelity 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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