Correlation Between KDA and MDA

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

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

Diversification Opportunities for KDA and MDA

-0.48

Correlation Coefficient

KDA  MDA

Very good diversification

The 3 months correlation between KDA and MDA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and MDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDA 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 MDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDA has no effect on the direction of KDA i.e., KDA and MDA go up and down completely randomly.

Pair Corralation between KDA and MDA

Assuming the 90 days horizon KDA is expected to generate 5.09 times less return on investment than MDA. In addition to that, KDA is 2.59 times more volatile than MDA. It trades about 0.03 of its total potential returns per unit of risk. MDA is currently generating about 0.38 per unit of volatility. If you would invest  1,669  in MDA on September 15, 2024 and sell it today you would earn a total of  1,181  from holding MDA or generate 70.76% return on investment over 90 days.

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

KDA Group  vs.  MDA

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MDA

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in MDA are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MDA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KDA and MDA

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

The idea behind KDA Group and MDA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .