Correlation Between Kinetics Market and Diplomat

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

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

Diversification Opportunities for Kinetics Market and Diplomat

0.06

Correlation Coefficient

Kinetics Market  Diplomat

Significant diversification

The 3 months correlation between Kinetics and Diplomat is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and The Diplomat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diplomat and Kinetics Market 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 Kinetics Market Opportunities are associated (or correlated) with Diplomat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diplomat has no effect on the direction of Kinetics Market i.e., Kinetics Market and Diplomat go up and down completely randomly.

Pair Corralation between Kinetics Market and Diplomat

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 5.38 times more return on investment than Diplomat. However, Kinetics Market is 5.38 times more volatile than The Diplomat. It trades about -0.04 of its potential returns per unit of risk. The Diplomat is currently generating about -0.58 per unit of risk. If you would invest  7,893  in Kinetics Market Opportunities on October 11, 2024 and sell it today you would lose (168.00) from holding Kinetics Market Opportunities or give up 2.13% of portfolio value over 90 days.

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

Kinetics Market Opportunities  vs.  The Diplomat

Kinetics Market Oppo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Market showed solid returns over the last few months and may actually be approaching a breakup point.

Diplomat

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kinetics Market and Diplomat

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

The idea behind Kinetics Market Opportunities and The Diplomat 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.