Correlation Between Celestia and Kava
Can any of the company-specific risk be diversified away by investing in both Celestia and Kava 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 Celestia and Kava into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Celestia and Kava, you can compare the effects of market volatilities on Celestia and Kava 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 Celestia with a short position of Kava. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celestia and Kava.
Diversification Opportunities for Celestia and Kava
Poor diversification
The 3 months correlation between Celestia and Kava is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Celestia and Kava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kava and Celestia 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 Celestia are associated (or correlated) with Kava. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kava has no effect on the direction of Celestia i.e., Celestia and Kava go up and down completely randomly.
Pair Corralation between Celestia and Kava
Assuming the 90 days trading horizon Celestia is expected to generate 1.73 times more return on investment than Kava. However, Celestia is 1.73 times more volatile than Kava. It trades about 0.25 of its potential returns per unit of risk. Kava is currently generating about 0.41 per unit of risk. If you would invest 528.00 in Celestia on August 29, 2024 and sell it today you would earn a total of 282.00 from holding Celestia or generate 53.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Celestia vs. Kava
Performance |
| Timeline |
| Celestia |
| Kava |
Celestia and Kava Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Celestia and Kava
The main advantage of trading using opposite Celestia and Kava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celestia position performs unexpectedly, Kava 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 Kava will offset losses from the drop in Kava's long position.The idea behind Celestia and Kava 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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