Correlation Between TLOS and Kadena

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

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

Diversification Opportunities for TLOS and Kadena

-0.4

Correlation Coefficient

TLOS  Kadena

Very good diversification

The 3 months correlation between TLOS and Kadena is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding TLOS and Kadena in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadena and TLOS 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 TLOS 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 TLOS i.e., TLOS and Kadena go up and down completely randomly.

Pair Corralation between TLOS and Kadena

Assuming the 90 days trading horizon TLOS is expected to under-perform the Kadena. But the crypto coin apears to be less risky and, when comparing its historical volatility, TLOS is 1.34 times less risky than Kadena. The crypto coin trades about 0.0 of its potential returns per unit of risk. The Kadena is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Kadena on September 3, 2024 and sell it today you would earn a total of  69.00  from holding Kadena or generate 132.69% return on investment over 90 days.

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

TLOS  vs.  Kadena

TLOS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TLOS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, TLOS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 TLOS and Kadena

The main advantage of trading using opposite TLOS and Kadena positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TLOS 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 TLOS 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.