Correlation Between KMD and ARPA Chain
Can any of the company-specific risk be diversified away by investing in both KMD and ARPA Chain 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 KMD and ARPA Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KMD and ARPA Chain, you can compare the effects of market volatilities on KMD and ARPA Chain 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 KMD with a short position of ARPA Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMD and ARPA Chain.
Diversification Opportunities for KMD and ARPA Chain
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KMD and ARPA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding KMD and ARPA Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA Chain and KMD 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 KMD are associated (or correlated) with ARPA Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARPA Chain has no effect on the direction of KMD i.e., KMD and ARPA Chain go up and down completely randomly.
Pair Corralation between KMD and ARPA Chain
Assuming the 90 days trading horizon KMD is expected to generate 1.27 times less return on investment than ARPA Chain. In addition to that, KMD is 1.11 times more volatile than ARPA Chain. It trades about 0.03 of its total potential returns per unit of risk. ARPA Chain is currently generating about 0.04 per unit of volatility. If you would invest 6.76 in ARPA Chain on December 30, 2023 and sell it today you would earn a total of 2.87 from holding ARPA Chain or generate 42.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
KMD vs. ARPA Chain
Performance |
Timeline |
KMD |
ARPA Chain |
KMD and ARPA Chain Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KMD and ARPA Chain
The main advantage of trading using opposite KMD and ARPA Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMD position performs unexpectedly, ARPA Chain 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 ARPA Chain will offset losses from the drop in ARPA Chain's long position.The idea behind KMD and ARPA Chain 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |