Correlation Between Audius and Kava

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

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

Diversification Opportunities for Audius and Kava

0.96

Correlation Coefficient

Audius  Kava

Almost no diversification

The 3 months correlation between Audius and Kava is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Audius and Kava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kava and Audius 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 Audius 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 Audius i.e., Audius and Kava go up and down completely randomly.

Pair Corralation between Audius and Kava

Assuming the 90 days trading horizon Audius is expected to under-perform the Kava. In addition to that, Audius is 1.07 times more volatile than Kava. It trades about -0.26 of its total potential returns per unit of risk. Kava is currently generating about -0.21 per unit of volatility. If you would invest  95.00  in Kava on January 20, 2024 and sell it today you would lose (28.00) from holding Kava or give up 29.47% of portfolio value over 90 days.

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

Audius  vs.  Kava

Audius

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Audius are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Audius may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Kava

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kava has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Audius and Kava

The main advantage of trading using opposite Audius and Kava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Audius 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 Audius 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.