Correlation Between Kinetics Market and Hennessy Nerstone

Can any of the company-specific risk be diversified away by investing in both Kinetics Market and Hennessy Nerstone 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 Hennessy Nerstone 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 Hennessy Nerstone Growth, you can compare the effects of market volatilities on Kinetics Market and Hennessy Nerstone 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 Hennessy Nerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Market and Hennessy Nerstone.

Diversification Opportunities for Kinetics Market and Hennessy Nerstone

0.63

Correlation Coefficient

Kinetics Market  Hennessy Nerstone

Poor diversification

The 3 months correlation between Kinetics and Hennessy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth 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 Hennessy Nerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of Kinetics Market i.e., Kinetics Market and Hennessy Nerstone go up and down completely randomly.

Pair Corralation between Kinetics Market and Hennessy Nerstone

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 1.18 times more return on investment than Hennessy Nerstone. However, Kinetics Market is 1.18 times more volatile than Hennessy Nerstone Growth. It trades about -0.04 of its potential returns per unit of risk. Hennessy Nerstone Growth is currently generating about -0.15 per unit of risk. If you would invest  7,977  in Kinetics Market Opportunities on September 16, 2024 and sell it today you would lose (327.00) from holding Kinetics Market Opportunities or give up 4.1% of portfolio value over 90 days.

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

Kinetics Market Opportunities  vs.  Hennessy Nerstone Growth

Kinetics Market Oppo

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 18 (%) 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.

Hennessy Nerstone Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Nerstone Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Hennessy Nerstone 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 Hennessy Nerstone

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

The idea behind Kinetics Market Opportunities and Hennessy Nerstone Growth 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.