Correlation Between Kusama and MLN

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

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

Diversification Opportunities for Kusama and MLN

0.34

Correlation Coefficient

Kusama  MLN

Weak diversification

The 3 months correlation between Kusama and MLN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and MLN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MLN and Kusama 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 Kusama are associated (or correlated) with MLN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MLN has no effect on the direction of Kusama i.e., Kusama and MLN go up and down completely randomly.

Pair Corralation between Kusama and MLN

Assuming the 90 days trading horizon Kusama is expected to under-perform the MLN. In addition to that, Kusama is 1.13 times more volatile than MLN. It trades about -0.3 of its total potential returns per unit of risk. MLN is currently generating about -0.09 per unit of volatility. If you would invest  2,579  in MLN on January 25, 2024 and sell it today you would lose (306.00) from holding MLN or give up 11.87% of portfolio value over 90 days.

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

Kusama  vs.  MLN

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 rather sound primary indicators, Kusama is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MLN

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MLN are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MLN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kusama and MLN

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

The idea behind Kusama and MLN 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.