Correlation Between Marinade and Kava

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

By analyzing existing cross correlation between Marinade and Kava, you can compare the effects of market volatilities on Marinade 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 Marinade with a short position of Kava. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marinade and Kava.

Diversification Opportunities for Marinade and Kava

0.81

Correlation Coefficient

Marinade  Kava

Very poor diversification

The 3 months correlation between Marinade and Kava is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Marinade and Kava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kava and Marinade 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 Marinade 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 Marinade i.e., Marinade and Kava go up and down completely randomly.

Pair Corralation between Marinade and Kava

Assuming the 90 days trading horizon Marinade is expected to generate 1.45 times more return on investment than Kava. However, Marinade is 1.45 times more volatile than Kava. It trades about -0.14 of its potential returns per unit of risk. Kava is currently generating about -0.25 per unit of risk. If you would invest  25.00  in Marinade on February 7, 2024 and sell it today you would lose (7.00) from holding Marinade or give up 28.0% of portfolio value over 90 days.

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

Marinade  vs.  Kava

Marinade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marinade 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 basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for Marinade shareholders.

Kava

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kava are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Kava is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Marinade and Kava

The main advantage of trading using opposite Marinade and Kava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marinade 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 Marinade 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.