Correlation Between STEPN and Kadena

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

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

Diversification Opportunities for STEPN and Kadena

0.91

Correlation Coefficient

STEPN  Kadena

Almost no diversification

The 3 months correlation between STEPN and Kadena is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding STEPN and Kadena in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadena and STEPN 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 STEPN are associated (or correlated) with Kadena. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadena has no effect on the direction of STEPN i.e., STEPN and Kadena go up and down completely randomly.

Pair Corralation between STEPN and Kadena

Assuming the 90 days trading horizon STEPN is expected to generate 1.1 times less return on investment than Kadena. In addition to that, STEPN is 1.13 times more volatile than Kadena. It trades about 0.18 of its total potential returns per unit of risk. Kadena is currently generating about 0.23 per unit of volatility. If you would invest  51.00  in Kadena on September 1, 2024 and sell it today you would earn a total of  72.00  from holding Kadena or generate 141.18% return on investment over 90 days.

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

STEPN  vs.  Kadena

STEPN

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STEPN are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, STEPN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kadena

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kadena are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Kadena exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STEPN and Kadena

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

The idea behind STEPN and Kadena 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.