Correlation Between Astor Longshort and Kinetics Paradigm

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

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

Diversification Opportunities for Astor Longshort and Kinetics Paradigm

0.83

Correlation Coefficient

Astor Longshort  Kinetics Paradigm

Very poor diversification

The 3 months correlation between Astor and Kinetics is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Astor Longshort Fund and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and Astor Longshort 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 Astor Longshort Fund are associated (or correlated) with Kinetics Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Paradigm has no effect on the direction of Astor Longshort i.e., Astor Longshort and Kinetics Paradigm go up and down completely randomly.

Pair Corralation between Astor Longshort and Kinetics Paradigm

Assuming the 90 days horizon Astor Longshort is expected to generate 10.9 times less return on investment than Kinetics Paradigm. But when comparing it to its historical volatility, Astor Longshort Fund is 5.47 times less risky than Kinetics Paradigm. It trades about 0.06 of its potential returns per unit of risk. Kinetics Paradigm Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,733  in Kinetics Paradigm Fund on September 21, 2024 and sell it today you would earn a total of  2,819  from holding Kinetics Paradigm Fund or generate 32.28% return on investment over 90 days.

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

Astor Longshort Fund  vs.  Kinetics Paradigm Fund

Astor Longshort

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astor Longshort Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Astor Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetics Paradigm

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astor Longshort and Kinetics Paradigm

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

The idea behind Astor Longshort Fund and Kinetics Paradigm Fund 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.