Correlation Between Kava and Tokocrypto

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

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

Diversification Opportunities for Kava and Tokocrypto

0.56

Correlation Coefficient

Kava  Tokocrypto

Very weak diversification

The 3 months correlation between Kava and Tokocrypto is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kava and Tokocrypto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokocrypto 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 Tokocrypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokocrypto has no effect on the direction of Kava i.e., Kava and Tokocrypto go up and down completely randomly.

Pair Corralation between Kava and Tokocrypto

Assuming the 90 days trading horizon Kava is expected to under-perform the Tokocrypto. But the crypto coin apears to be less risky and, when comparing its historical volatility, Kava is 1.39 times less risky than Tokocrypto. The crypto coin trades about -0.07 of its potential returns per unit of risk. The Tokocrypto is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Tokocrypto on November 28, 2024 and sell it today you would lose (4.00) from holding Tokocrypto or give up 10.26% of portfolio value over 90 days.

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

Kava  vs.  Tokocrypto

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.

Tokocrypto

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokocrypto are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tokocrypto may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Kava and Tokocrypto

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

The idea behind Kava and Tokocrypto 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.