Correlation Between Materials Portfolio and Kinetics Market

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

By analyzing existing cross correlation between Materials Portfolio Fidelity and Kinetics Market Opportunities, you can compare the effects of market volatilities on Materials Portfolio and Kinetics Market 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 Materials Portfolio with a short position of Kinetics Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Kinetics Market.

Diversification Opportunities for Materials Portfolio and Kinetics Market

0.49

Correlation Coefficient

Materials Portfolio  Kinetics Market

Very weak diversification

The 3 months correlation between Materials and Kinetics is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Kinetics Market Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Market Oppo and Materials Portfolio 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 Materials Portfolio Fidelity are associated (or correlated) with Kinetics Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Market Oppo has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Kinetics Market go up and down completely randomly.

Pair Corralation between Materials Portfolio and Kinetics Market

Assuming the 90 days horizon Materials Portfolio is expected to generate 7.95 times less return on investment than Kinetics Market. But when comparing it to its historical volatility, Materials Portfolio Fidelity is 2.3 times less risky than Kinetics Market. It trades about 0.12 of its potential returns per unit of risk. Kinetics Market Opportunities is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  5,872  in Kinetics Market Opportunities on September 2, 2024 and sell it today you would earn a total of  3,982  from holding Kinetics Market Opportunities or generate 67.81% return on investment over 90 days.

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

Materials Portfolio Fidelity  vs.  Kinetics Market Opportunities

Materials Portfolio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Materials Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kinetics Market Oppo

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Market showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materials Portfolio and Kinetics Market

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

The idea behind Materials Portfolio Fidelity and Kinetics Market Opportunities 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.