Correlation Between Kava and BLZ
Can any of the company-specific risk be diversified away by investing in both Kava and BLZ 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 Kava and BLZ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kava and BLZ, you can compare the effects of market volatilities on Kava and BLZ 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 Kava with a short position of BLZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kava and BLZ.
Diversification Opportunities for Kava and BLZ
Poor diversification
The 3 months correlation between Kava and BLZ is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kava and BLZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLZ and Kava 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 Kava are associated (or correlated) with BLZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLZ has no effect on the direction of Kava i.e., Kava and BLZ go up and down completely randomly.
Pair Corralation between Kava and BLZ
Assuming the 90 days trading horizon Kava is expected to generate 0.6 times more return on investment than BLZ. However, Kava is 1.67 times less risky than BLZ. It trades about -0.07 of its potential returns per unit of risk. BLZ is currently generating about -0.11 per unit of risk. If you would invest 50.00 in Kava on November 8, 2024 and sell it today you would lose (4.00) from holding Kava or give up 8.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Kava vs. BLZ
Performance |
| Timeline |
| Kava |
| BLZ |
Kava and BLZ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kava and BLZ
The main advantage of trading using opposite Kava and BLZ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kava position performs unexpectedly, BLZ 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 BLZ will offset losses from the drop in BLZ's long position.The idea behind Kava and BLZ 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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |