Correlation Between Wormhole and KMD
Can any of the company-specific risk be diversified away by investing in both Wormhole and KMD 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 Wormhole and KMD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wormhole and KMD, you can compare the effects of market volatilities on Wormhole and KMD 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 Wormhole with a short position of KMD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wormhole and KMD.
Diversification Opportunities for Wormhole and KMD
Weak diversification
The 3 months correlation between Wormhole and KMD is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Wormhole and KMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMD and Wormhole 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 Wormhole are associated (or correlated) with KMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMD has no effect on the direction of Wormhole i.e., Wormhole and KMD go up and down completely randomly.
Pair Corralation between Wormhole and KMD
Given the investment horizon of 90 days Wormhole is expected to generate 7.28 times less return on investment than KMD. In addition to that, Wormhole is 1.21 times more volatile than KMD. It trades about 0.03 of its total potential returns per unit of risk. KMD is currently generating about 0.24 per unit of volatility. If you would invest 23.00 in KMD on August 25, 2024 and sell it today you would earn a total of 6.00 from holding KMD or generate 26.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wormhole vs. KMD
Performance |
| Timeline |
| Wormhole |
| KMD |
Wormhole and KMD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wormhole and KMD
The main advantage of trading using opposite Wormhole and KMD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wormhole position performs unexpectedly, KMD 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 KMD will offset losses from the drop in KMD's long position.The idea behind Wormhole and KMD 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |