Correlation Between Kusama and PPT

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

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

Diversification Opportunities for Kusama and PPT

0.01

Correlation Coefficient

Kusama  PPT

Significant diversification

The 3 months correlation between Kusama and PPT is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and PPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPT 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 PPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPT has no effect on the direction of Kusama i.e., Kusama and PPT go up and down completely randomly.

Pair Corralation between Kusama and PPT

Assuming the 90 days trading horizon Kusama is expected to under-perform the PPT. But the crypto coin apears to be less risky and, when comparing its historical volatility, Kusama is 4.1 times less risky than PPT. The crypto coin trades about -0.09 of its potential returns per unit of risk. The PPT is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.68  in PPT on January 24, 2024 and sell it today you would lose (0.04) from holding PPT or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Kusama  vs.  PPT

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.

PPT

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PPT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kusama and PPT

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

The idea behind Kusama and PPT 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.