Correlation Between Kava and Meta Platforms

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Can any of the company-specific risk be diversified away by investing in both Kava and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kava and Meta Platforms, you can compare the effects of market volatilities on Kava and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kava and Meta Platforms.

Diversification Opportunities for Kava and Meta Platforms

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Kava and Meta Platforms is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kava and Meta Platforms in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Kava i.e., Kava and Meta Platforms go up and down completely randomly.

Pair Corralation between Kava and Meta Platforms

Assuming the 90 days trading horizon Kava is expected to under-perform the Meta Platforms. In addition to that, Kava is 2.25 times more volatile than Meta Platforms. It trades about -0.02 of its total potential returns per unit of risk. Meta Platforms is currently generating about -0.01 per unit of volatility. If you would invest  20,616  in Meta Platforms on February 18, 2022 and sell it today you would lose (1,392)  from holding Meta Platforms or give up 6.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Kava  vs.  Meta Platforms

 Performance (%) 
      Timeline 
Kava 
Kava Performance
0 of 100
Over the last 90 days Kava has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Kava investors.

Kava Price Channel

Meta Platforms 
Meta Platforms Performance
0 of 100
Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Meta Platforms Price Channel

Kava and Meta Platforms Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Kava and Meta Platforms

The main advantage of trading using opposite Kava and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kava position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.
The idea behind Kava and Meta Platforms 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 CEO Directory module to screen CEOs from public companies around the world.

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