Correlation Between KDA and Fidelity LongShort

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

By analyzing existing cross correlation between KDA Group and Fidelity LongShort Alternative, you can compare the effects of market volatilities on KDA and Fidelity LongShort 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 KDA with a short position of Fidelity LongShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of KDA and Fidelity LongShort.

Diversification Opportunities for KDA and Fidelity LongShort

-0.3

Correlation Coefficient

KDA  Fidelity LongShort

Very good diversification

The 3 months correlation between KDA and Fidelity is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Fidelity LongShort Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity LongShort and KDA 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 KDA Group are associated (or correlated) with Fidelity LongShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity LongShort has no effect on the direction of KDA i.e., KDA and Fidelity LongShort go up and down completely randomly.

Pair Corralation between KDA and Fidelity LongShort

Assuming the 90 days horizon KDA Group is expected to generate 12.07 times more return on investment than Fidelity LongShort. However, KDA is 12.07 times more volatile than Fidelity LongShort Alternative. It trades about 0.07 of its potential returns per unit of risk. Fidelity LongShort Alternative is currently generating about 0.13 per unit of risk. If you would invest  9.50  in KDA Group on September 24, 2024 and sell it today you would earn a total of  20.50  from holding KDA Group or generate 215.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.78%
Values	Daily Returns

KDA Group  vs.  Fidelity LongShort Alternative

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity LongShort

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity LongShort Alternative are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Fidelity LongShort is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KDA and Fidelity LongShort

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

The idea behind KDA Group and Fidelity LongShort Alternative 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.