Correlation Between Kinetics Market and Gmo Small

Can any of the company-specific risk be diversified away by investing in both Kinetics Market and Gmo 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 Kinetics Market and Gmo Small 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 Gmo Small Cap, you can compare the effects of market volatilities on Kinetics Market and Gmo 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 Kinetics Market with a short position of Gmo Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Market and Gmo Small.

Diversification Opportunities for Kinetics Market and Gmo Small

0.77

Correlation Coefficient

Kinetics Market  Gmo Small

Poor diversification

The 3 months correlation between Kinetics and Gmo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap 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 Gmo Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Kinetics Market i.e., Kinetics Market and Gmo Small go up and down completely randomly.

Pair Corralation between Kinetics Market and Gmo Small

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 1.84 times more return on investment than Gmo Small. However, Kinetics Market is 1.84 times more volatile than Gmo Small Cap. It trades about 0.38 of its potential returns per unit of risk. Gmo Small Cap is currently generating about 0.07 per unit of risk. If you would invest  5,569  in Kinetics Market Opportunities on August 30, 2024 and sell it today you would earn a total of  3,519  from holding Kinetics Market Opportunities or generate 63.19% return on investment over 90 days.

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

Kinetics Market Opportunities  vs.  Gmo Small Cap

Kinetics Market Oppo

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 29 (%) 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.

Gmo Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Small 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 Gmo Small

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

The idea behind Kinetics Market Opportunities and Gmo 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.