Correlation Between KMD and Ontology

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

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

Diversification Opportunities for KMD and Ontology

0.89

Correlation Coefficient

KMD  Ontology

Very poor diversification

The 3 months correlation between KMD and Ontology is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding KMD and Ontology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontology and KMD 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 KMD are associated (or correlated) with Ontology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontology has no effect on the direction of KMD i.e., KMD and Ontology go up and down completely randomly.

Pair Corralation between KMD and Ontology

Assuming the 90 days trading horizon KMD is expected to under-perform the Ontology. But the crypto coin apears to be less risky and, when comparing its historical volatility, KMD is 1.19 times less risky than Ontology. The crypto coin trades about -0.12 of its potential returns per unit of risk. The Ontology is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Ontology on November 27, 2024 and sell it today you would lose (10.00) from holding Ontology or give up 37.04% of portfolio value over 90 days.

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

KMD  vs.  Ontology

KMD

Risk-Adjusted Performance

Very Weak

Over the last 90 days KMD 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 KMD shareholders.

Ontology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ontology 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 basic 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 Ontology shareholders.

Pair Trading with KMD and Ontology

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

The idea behind KMD and Ontology 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.