Correlation Between KDA and Mainstreet Equity

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

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

Diversification Opportunities for KDA and Mainstreet Equity

0.16

Correlation Coefficient

KDA  Mainstreet Equity

Average diversification

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

Pair Corralation between KDA and Mainstreet Equity

Assuming the 90 days horizon KDA Group is expected to generate 2.19 times more return on investment than Mainstreet Equity. However, KDA is 2.19 times more volatile than Mainstreet Equity Corp. It trades about -0.02 of its potential returns per unit of risk. Mainstreet Equity Corp is currently generating about -0.06 per unit of risk. If you would invest  29.00  in KDA Group on December 30, 2024 and sell it today you would lose (3.00) from holding KDA Group or give up 10.34% of portfolio value over 90 days.

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

KDA Group  vs.  Mainstreet Equity Corp

KDA Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days KDA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, KDA is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mainstreet Equity Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mainstreet Equity Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with KDA and Mainstreet Equity

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

The idea behind KDA Group and Mainstreet Equity Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.