Correlation Between Kava and Phala Network

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Can any of the company-specific risk be diversified away by investing in both Kava and Phala Network 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 Phala Network into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kava and Phala Network, you can compare the effects of market volatilities on Kava and Phala Network 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 Phala Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kava and Phala Network.

Diversification Opportunities for Kava and Phala Network

KavaPhalaDiversified AwayKavaPhalaDiversified Away100%
-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Kava and Phala is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kava and Phala Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phala Network 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 Phala Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phala Network has no effect on the direction of Kava i.e., Kava and Phala Network go up and down completely randomly.

Pair Corralation between Kava and Phala Network

Assuming the 90 days trading horizon Kava is expected to generate 0.63 times more return on investment than Phala Network. However, Kava is 1.58 times less risky than Phala Network. It trades about -0.07 of its potential returns per unit of risk. Phala Network is currently generating about -0.25 per unit of risk. If you would invest  46.00  in Kava on November 23, 2024 and sell it today you would lose (4.00) from holding Kava or give up 8.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kava  vs.  Phala Network

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 050100150200250300
JavaScript chart by amCharts 3.21.15KAVA PHA
       Timeline  
Kava 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Kava has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Kava is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.40.450.50.550.60.650.70.75
Phala Network 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Phala Network are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Phala Network exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.20.30.40.50.6

Kava and Phala Network Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-19.83-14.85-9.87-4.90.04.899.9515.0120.0625.12 0.0020.0040.0060.0080.010
JavaScript chart by amCharts 3.21.15KAVA PHA
       Returns  

Pair Trading with Kava and Phala Network

The main advantage of trading using opposite Kava and Phala Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kava position performs unexpectedly, Phala Network 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 Phala Network will offset losses from the drop in Phala Network's long position.
The idea behind Kava and Phala Network 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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