Correlation Between American Century and Kinetics Small

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

By analyzing existing cross correlation between American Century Non Us and Kinetics Small Cap, you can compare the effects of market volatilities on American Century and Kinetics Small 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 American Century with a short position of Kinetics Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Kinetics Small.

Diversification Opportunities for American Century and Kinetics Small

0.59

Correlation Coefficient

American Century  Kinetics Small

Very weak diversification

The 3 months correlation between American and Kinetics is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Century Non Us and Kinetics Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Small Cap and American Century 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 American Century Non Us are associated (or correlated) with Kinetics Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Small Cap has no effect on the direction of American Century i.e., American Century and Kinetics Small go up and down completely randomly.

Pair Corralation between American Century and Kinetics Small

Assuming the 90 days horizon American Century is expected to generate 1.45 times less return on investment than Kinetics Small. But when comparing it to its historical volatility, American Century Non Us is 2.08 times less risky than Kinetics Small. It trades about 0.16 of its potential returns per unit of risk. Kinetics Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  19,154  in Kinetics Small Cap on December 2, 2024 and sell it today you would earn a total of  788.00  from holding Kinetics Small Cap or generate 4.11% return on investment over 90 days.

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

American Century Non Us  vs.  Kinetics Small Cap

American Century Non

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century Non Us has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetics Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinetics Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with American Century and Kinetics Small

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

The idea behind American Century Non Us and Kinetics Small Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.