Correlation Between Kusama and Portal

Can any of the company-specific risk be diversified away by investing in both Kusama and Portal 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 Portal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kusama and Portal, you can compare the effects of market volatilities on Kusama and Portal 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 Portal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kusama and Portal.

Diversification Opportunities for Kusama and Portal

0.35

Correlation Coefficient

Kusama  Portal

Weak diversification

The 3 months correlation between Kusama and Portal is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and Portal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portal 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 Portal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portal has no effect on the direction of Kusama i.e., Kusama and Portal go up and down completely randomly.

Pair Corralation between Kusama and Portal

Assuming the 90 days trading horizon Kusama is expected to generate 0.74 times more return on investment than Portal. However, Kusama is 1.35 times less risky than Portal. It trades about -0.27 of its potential returns per unit of risk. Portal is currently generating about -0.36 per unit of risk. If you would invest  4,247  in Kusama on January 30, 2024 and sell it today you would lose (1,275) from holding Kusama or give up 30.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Kusama  vs.  Portal

Kusama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kusama has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for Kusama shareholders.

Portal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Portal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Portal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kusama and Portal

The main advantage of trading using opposite Kusama and Portal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kusama position performs unexpectedly, Portal 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 Portal will offset losses from the drop in Portal's long position.

The idea behind Kusama and Portal 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.