Correlation Between Kusama and AKRO
Can any of the company-specific risk be diversified away by investing in both Kusama and AKRO 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 Kusama and AKRO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kusama and AKRO, you can compare the effects of market volatilities on Kusama and AKRO 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 Kusama with a short position of AKRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kusama and AKRO.
Diversification Opportunities for Kusama and AKRO
Weak diversification
The 3 months correlation between Kusama and AKRO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and AKRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKRO and Kusama 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 Kusama are associated (or correlated) with AKRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKRO has no effect on the direction of Kusama i.e., Kusama and AKRO go up and down completely randomly.
Pair Corralation between Kusama and AKRO
Assuming the 90 days trading horizon Kusama is expected to generate 8.49 times less return on investment than AKRO. But when comparing it to its historical volatility, Kusama is 1.43 times less risky than AKRO. It trades about 0.01 of its potential returns per unit of risk. AKRO is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.30 in AKRO on August 25, 2024 and sell it today you would earn a total of 0.11 from holding AKRO or generate 35.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kusama vs. AKRO
Performance |
| Timeline |
| Kusama |
| AKRO |
Kusama and AKRO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kusama and AKRO
The main advantage of trading using opposite Kusama and AKRO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kusama position performs unexpectedly, AKRO 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 AKRO will offset losses from the drop in AKRO's long position.The idea behind Kusama and AKRO 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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