Correlation Between KVH Industries and Fidelity Freedom

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

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

Diversification Opportunities for KVH Industries and Fidelity Freedom

0.35

Correlation Coefficient

KVH Industries  Fidelity Freedom

Weak diversification

The 3 months correlation between KVH and Fidelity is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries 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 KVH Industries 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 KVH Industries 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 KVH Industries i.e., KVH Industries and Fidelity Freedom go up and down completely randomly.

Pair Corralation between KVH Industries and Fidelity Freedom

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Fidelity Freedom. In addition to that, KVH Industries is 5.18 times more volatile than Fidelity Freedom Index. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.05 per unit of volatility. If you would invest  1,863  in Fidelity Freedom Index on December 29, 2024 and sell it today you would earn a total of  25.00  from holding Fidelity Freedom Index or generate 1.34% return on investment over 90 days.

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

KVH Industries  vs.  Fidelity Freedom Index

KVH Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days KVH Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, KVH Industries is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Fidelity Freedom Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KVH Industries and Fidelity Freedom

The main advantage of trading using opposite KVH Industries and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KVH Industries 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 KVH Industries 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.