Correlation Between Cardano and Kava

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

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

Diversification Opportunities for Cardano and Kava

0.67

Correlation Coefficient

Cardano  Kava

Poor diversification

The 3 months correlation between Cardano and Kava is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Kava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kava and Cardano 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 Cardano 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 Cardano i.e., Cardano and Kava go up and down completely randomly.

Pair Corralation between Cardano and Kava

Assuming the 90 days trading horizon Cardano is expected to under-perform the Kava. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cardano is 1.05 times less risky than Kava. The crypto coin trades about -0.09 of its potential returns per unit of risk. The Kava is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Kava on November 28, 2024 and sell it today you would lose (20.00) from holding Kava or give up 33.33% of portfolio value over 90 days.

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

Cardano  vs.  Kava

Cardano

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cardano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Cardano shareholders.

Kava

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kava has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Kava shareholders.

Pair Trading with Cardano and Kava

The main advantage of trading using opposite Cardano and Kava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardano 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.

The idea behind Cardano and Kava 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.