Correlation Between Kusama and KARRAT
Can any of the company-specific risk be diversified away by investing in both Kusama and KARRAT 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 KARRAT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kusama and KARRAT, you can compare the effects of market volatilities on Kusama and KARRAT 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 KARRAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kusama and KARRAT.
Diversification Opportunities for Kusama and KARRAT
Very weak diversification
The 3 months correlation between Kusama and KARRAT is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and KARRAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KARRAT 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 KARRAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KARRAT has no effect on the direction of Kusama i.e., Kusama and KARRAT go up and down completely randomly.
Pair Corralation between Kusama and KARRAT
Assuming the 90 days trading horizon Kusama is expected to generate 0.85 times more return on investment than KARRAT. However, Kusama is 1.18 times less risky than KARRAT. It trades about 0.02 of its potential returns per unit of risk. KARRAT is currently generating about 0.0 per unit of risk. If you would invest 2,901 in Kusama on November 11, 2024 and sell it today you would lose (965.00) from holding Kusama or give up 33.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kusama vs. KARRAT
Performance |
| Timeline |
| Kusama |
| KARRAT |
Kusama and KARRAT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kusama and KARRAT
The main advantage of trading using opposite Kusama and KARRAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kusama position performs unexpectedly, KARRAT 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 KARRAT will offset losses from the drop in KARRAT's long position.The idea behind Kusama and KARRAT 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |