Correlation Between Kava and Bluzelle

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

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

Diversification Opportunities for Kava and Bluzelle

0.39

Correlation Coefficient

Kava  Bluzelle

Weak diversification

The 3 months correlation between Kava and Bluzelle is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kava and Bluzelle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluzelle and Kava 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 Kava are associated (or correlated) with Bluzelle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluzelle has no effect on the direction of Kava i.e., Kava and Bluzelle go up and down completely randomly.

Pair Corralation between Kava and Bluzelle

Assuming the 90 days trading horizon Kava is expected to under-perform the Bluzelle. But the crypto coin apears to be less risky and, when comparing its historical volatility, Kava is 1.12 times less risky than Bluzelle. The crypto coin trades about -0.2 of its potential returns per unit of risk. The Bluzelle is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Bluzelle on January 30, 2024 and sell it today you would lose (3.00) from holding Bluzelle or give up 7.89% of portfolio value over 90 days.

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

Kava  vs.  Bluzelle

Kava

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kava are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Kava is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bluzelle

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bluzelle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bluzelle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kava and Bluzelle

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

The idea behind Kava and Bluzelle 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.