Correlation Between Kusama and PAY
Can any of the company-specific risk be diversified away by investing in both Kusama and PAY 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 PAY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kusama and PAY, you can compare the effects of market volatilities on Kusama and PAY 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 PAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kusama and PAY.
Diversification Opportunities for Kusama and PAY
Weak diversification
The 3 months correlation between Kusama and PAY is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and PAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAY 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 PAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAY has no effect on the direction of Kusama i.e., Kusama and PAY go up and down completely randomly.
Pair Corralation between Kusama and PAY
Assuming the 90 days trading horizon Kusama is expected to generate 0.68 times more return on investment than PAY. However, Kusama is 1.47 times less risky than PAY. It trades about 0.11 of its potential returns per unit of risk. PAY is currently generating about 0.04 per unit of risk. If you would invest 1,816 in Kusama on August 23, 2024 and sell it today you would earn a total of 184.00 from holding Kusama or generate 10.13% 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. PAY
Performance |
| Timeline |
| Kusama |
| PAY |
Kusama and PAY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kusama and PAY
The main advantage of trading using opposite Kusama and PAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kusama position performs unexpectedly, PAY 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 PAY will offset losses from the drop in PAY's long position.The idea behind Kusama and PAY 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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