Correlation Between OPEN and Kusama

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

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

Diversification Opportunities for OPEN and Kusama

-0.6

Correlation Coefficient

OPEN  Kusama

Excellent diversification

The 3 months correlation between OPEN and Kusama is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding OPEN and Kusama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kusama and OPEN 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 OPEN are associated (or correlated) with Kusama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kusama has no effect on the direction of OPEN i.e., OPEN and Kusama go up and down completely randomly.

Pair Corralation between OPEN and Kusama

Assuming the 90 days trading horizon OPEN is expected to generate 36.36 times more return on investment than Kusama. However, OPEN is 36.36 times more volatile than Kusama. It trades about 0.23 of its potential returns per unit of risk. Kusama is currently generating about -0.26 per unit of risk. If you would invest  0.05  in OPEN on February 7, 2024 and sell it today you would earn a total of  4.00  from holding OPEN or generate 8781.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

OPEN  vs.  Kusama

OPEN

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OPEN are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, OPEN exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 June 2024. The latest tumult may also be a sign of longer-term up-swing for Kusama shareholders.

Pair Trading with OPEN and Kusama

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

The idea behind OPEN and Kusama 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.