Correlation Between Us Government and Kinetics Paradigm

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

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

Diversification Opportunities for Us Government and Kinetics Paradigm

0.32

Correlation Coefficient

Us Government  Kinetics Paradigm

Weak diversification

The 3 months correlation between CGTCX and Kinetics is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Kinetics Paradigm go up and down completely randomly.

Pair Corralation between Us Government and Kinetics Paradigm

Assuming the 90 days horizon Us Government Securities is expected to generate 0.12 times more return on investment than Kinetics Paradigm. However, Us Government Securities is 8.11 times less risky than Kinetics Paradigm. It trades about 0.03 of its potential returns per unit of risk. Kinetics Paradigm Fund is currently generating about -0.13 per unit of risk. If you would invest  1,177  in Us Government Securities on November 28, 2024 and sell it today you would earn a total of  7.00  from holding Us Government Securities or generate 0.59% return on investment over 90 days.

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

Us Government Securities  vs.  Kinetics Paradigm Fund

Us Government Securities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Us Government 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

Very Weak

Over the last 90 days Kinetics Paradigm Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Us Government and Kinetics Paradigm

The main advantage of trading using opposite Us Government and Kinetics Paradigm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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 Us Government Securities 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.