Correlation Between KMD and ARPA Chain

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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 Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

KMD  vs.  ARPA Chain

 Performance 
       Timeline  
KMD 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in KMD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KMD exhibited solid returns over the last few months and may actually be approaching a breakup point.
ARPA Chain 

Risk-Adjusted Performance

10 of 100

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

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.

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