Correlation Between Kava and JAR

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

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

Diversification Opportunities for Kava and JAR

0.26

Correlation Coefficient

Kava  JAR

Modest diversification

The 3 months correlation between Kava and JAR is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kava and JAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAR 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 JAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAR has no effect on the direction of Kava i.e., Kava and JAR go up and down completely randomly.

Pair Corralation between Kava and JAR

Assuming the 90 days trading horizon Kava is expected to generate 2.41 times less return on investment than JAR. But when comparing it to its historical volatility, Kava is 1.13 times less risky than JAR. It trades about 0.05 of its potential returns per unit of risk. JAR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.34  in JAR on February 16, 2025 and sell it today you would earn a total of  0.02  from holding JAR or generate 7.25% return on investment over 90 days.

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

Kava  vs.  JAR

Kava

Risk-Adjusted Performance

Very Weak

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

JAR

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kava and JAR

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

The idea behind Kava and JAR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..