Correlation Between Near and KIN
Can any of the company-specific risk be diversified away by investing in both Near and KIN 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 Near and KIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Near and KIN, you can compare the effects of market volatilities on Near and KIN 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 Near with a short position of KIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Near and KIN.
Diversification Opportunities for Near and KIN
Very good diversification
The 3 months correlation between Near and KIN is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Near and KIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIN and Near 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 Near are associated (or correlated) with KIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIN has no effect on the direction of Near i.e., Near and KIN go up and down completely randomly.
Pair Corralation between Near and KIN
Assuming the 90 days trading horizon Near is expected to generate 2.74 times more return on investment than KIN. However, Near is 2.74 times more volatile than KIN. It trades about 0.06 of its potential returns per unit of risk. KIN is currently generating about 0.05 per unit of risk. If you would invest 166.00 in Near on September 3, 2024 and sell it today you would earn a total of 535.00 from holding Near or generate 322.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Near vs. KIN
Performance |
| Timeline |
| Near |
| KIN |
Near and KIN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Near and KIN
The main advantage of trading using opposite Near and KIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Near position performs unexpectedly, KIN 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 KIN will offset losses from the drop in KIN's long position.The idea behind Near and KIN 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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