Correlation Between Ethereum and Kava

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

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

Diversification Opportunities for Ethereum and Kava

0.25

Correlation Coefficient

Ethereum  Kava

Modest diversification

The 3 months correlation between Ethereum and Kava is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Kava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kava and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and Kava go up and down completely randomly.

Pair Corralation between Ethereum and Kava

Assuming the 90 days trading horizon Ethereum is expected to under-perform the Kava. But the crypto coin apears to be less risky and, when comparing its historical volatility, Ethereum is 1.16 times less risky than Kava. The crypto coin trades about -0.21 of its potential returns per unit of risk. The Kava is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Kava on December 30, 2024 and sell it today you would lose (2.00) from holding Kava or give up 4.55% of portfolio value over 90 days.

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

Ethereum  vs.  Kava

Ethereum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ethereum 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 technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Ethereum 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 rather sound fundamental indicators, Kava is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ethereum and Kava

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

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.