Correlation Between KDA and Advent Wireless

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

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

Diversification Opportunities for KDA and Advent Wireless

-0.16

Correlation Coefficient

KDA  Advent Wireless

Good diversification

The 3 months correlation between KDA and Advent is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless and KDA 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 KDA Group are associated (or correlated) with Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of KDA i.e., KDA and Advent Wireless go up and down completely randomly.

Pair Corralation between KDA and Advent Wireless

Assuming the 90 days horizon KDA Group is expected to generate 2.16 times more return on investment than Advent Wireless. However, KDA is 2.16 times more volatile than Advent Wireless. It trades about 0.07 of its potential returns per unit of risk. Advent Wireless is currently generating about 0.04 per unit of risk. If you would invest  8.50  in KDA Group on September 2, 2024 and sell it today you would earn a total of  18.50  from holding KDA Group or generate 217.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

KDA Group  vs.  Advent Wireless

KDA Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KDA showed solid returns over the last few months and may actually be approaching a breakup point.

Advent Wireless

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advent Wireless showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KDA and Advent Wireless

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

The idea behind KDA Group and Advent Wireless 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.