Correlation Between Phala Network and Kava
Can any of the company-specific risk be diversified away by investing in both Phala Network 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 Phala Network and Kava into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phala Network and Kava, you can compare the effects of market volatilities on Phala Network 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 Phala Network with a short position of Kava. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phala Network and Kava.
Diversification Opportunities for Phala Network and Kava
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Phala and Kava is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Phala Network and Kava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kava and Phala Network 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 Phala Network 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 Phala Network i.e., Phala Network and Kava go up and down completely randomly.
Pair Corralation between Phala Network and Kava
Assuming the 90 days trading horizon Phala Network is expected to under-perform the Kava. In addition to that, Phala Network is 1.0 times more volatile than Kava. It trades about -0.2 of its total potential returns per unit of risk. Kava is currently generating about -0.18 per unit of volatility. If you would invest 98.00 in Kava on January 26, 2024 and sell it today you would lose (25.00) from holding Kava or give up 25.51% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Phala Network vs. Kava
Performance |
Timeline |
Phala Network |
Kava |
Phala Network and Kava Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Phala Network and Kava
The main advantage of trading using opposite Phala Network and Kava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phala Network 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.Phala Network vs. Solana | Phala Network vs. XRP | Phala Network vs. Staked Ether | Phala Network vs. The Open Network |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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