Correlation Between KMD and Maverick Protocol

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

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

Diversification Opportunities for KMD and Maverick Protocol

0.75

Correlation Coefficient

KMD  Maverick Protocol

Poor diversification

The 3 months correlation between KMD and Maverick is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KMD and Maverick Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maverick Protocol 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 Maverick Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maverick Protocol has no effect on the direction of KMD i.e., KMD and Maverick Protocol go up and down completely randomly.

Pair Corralation between KMD and Maverick Protocol

Assuming the 90 days trading horizon KMD is expected to generate 1.11 times less return on investment than Maverick Protocol. But when comparing it to its historical volatility, KMD is 1.37 times less risky than Maverick Protocol. It trades about 0.15 of its potential returns per unit of risk. Maverick Protocol is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Maverick Protocol on September 1, 2024 and sell it today you would earn a total of  8.00  from holding Maverick Protocol or generate 42.11% return on investment over 90 days.

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

KMD  vs.  Maverick Protocol

KMD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KMD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KMD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Maverick Protocol

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with KMD and Maverick Protocol

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

The idea behind KMD and Maverick Protocol 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.