Correlation Between Kusama and MNW
Can any of the company-specific risk be diversified away by investing in both Kusama and MNW 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 MNW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kusama and MNW, you can compare the effects of market volatilities on Kusama and MNW 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 MNW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kusama and MNW.
Diversification Opportunities for Kusama and MNW
Modest diversification
The 3 months correlation between Kusama and MNW is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and MNW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MNW 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 MNW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MNW has no effect on the direction of Kusama i.e., Kusama and MNW go up and down completely randomly.
Pair Corralation between Kusama and MNW
Assuming the 90 days trading horizon Kusama is expected to generate 19.27 times less return on investment than MNW. But when comparing it to its historical volatility, Kusama is 32.43 times less risky than MNW. It trades about 0.32 of its potential returns per unit of risk. MNW is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 34.00 in MNW on August 25, 2024 and sell it today you would earn a total of 2.00 from holding MNW or generate 5.88% 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. MNW
Performance |
| Timeline |
| Kusama |
| MNW |
Kusama and MNW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kusama and MNW
The main advantage of trading using opposite Kusama and MNW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kusama position performs unexpectedly, MNW 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 MNW will offset losses from the drop in MNW's long position.The idea behind Kusama and MNW 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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