Correlation Between Kava and LRN

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

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

Diversification Opportunities for Kava and LRN

-0.07

Correlation Coefficient

Kava  LRN

Good diversification

The 3 months correlation between Kava and LRN is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kava and LRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LRN and Kava 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 Kava are associated (or correlated) with LRN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LRN has no effect on the direction of Kava i.e., Kava and LRN go up and down completely randomly.

Pair Corralation between Kava and LRN

Assuming the 90 days trading horizon Kava is expected to under-perform the LRN. But the crypto coin apears to be less risky and, when comparing its historical volatility, Kava is 1.72 times less risky than LRN. The crypto coin trades about -0.04 of its potential returns per unit of risk. The LRN is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.24  in LRN on November 27, 2024 and sell it today you would lose (0.07) from holding LRN or give up 30.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Kava  vs.  LRN

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.

LRN

Risk-Adjusted Performance

Very Weak

Over the last 90 days LRN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LRN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kava and LRN

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

The idea behind Kava and LRN 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.