Correlation Between Fidelity and Kentucky First

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

By analyzing existing cross correlation between Fidelity DD Bancorp and Kentucky First Federal, you can compare the effects of market volatilities on Fidelity and Kentucky First 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 with a short position of Kentucky First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity and Kentucky First.

Diversification Opportunities for Fidelity and Kentucky First

-0.53

Correlation Coefficient

Fidelity  Kentucky First

Excellent diversification

The 3 months correlation between Fidelity and Kentucky is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity DD Bancorp and Kentucky First Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky First Federal and Fidelity 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 DD Bancorp are associated (or correlated) with Kentucky First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentucky First Federal has no effect on the direction of Fidelity i.e., Fidelity and Kentucky First go up and down completely randomly.

Pair Corralation between Fidelity and Kentucky First

Given the investment horizon of 90 days Fidelity DD Bancorp is expected to generate 0.65 times more return on investment than Kentucky First. However, Fidelity DD Bancorp is 1.55 times less risky than Kentucky First. It trades about 0.08 of its potential returns per unit of risk. Kentucky First Federal is currently generating about -0.03 per unit of risk. If you would invest  5,202  in Fidelity DD Bancorp on September 4, 2024 and sell it today you would earn a total of  177.00  from holding Fidelity DD Bancorp or generate 3.4% return on investment over 90 days.

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

Fidelity DD Bancorp  vs.  Kentucky First Federal

Fidelity DD Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity DD Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Fidelity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kentucky First Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kentucky First Federal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Kentucky First is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity and Kentucky First

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

The idea behind Fidelity DD Bancorp and Kentucky First Federal 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.