Correlation Between Kinetics Market and Small Cap

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

Diversification Opportunities for Kinetics Market and Small Cap

0.34

Correlation Coefficient

Kinetics Market  Small Cap

Weak diversification

The 3 months correlation between Kinetics and Small is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Kinetics Market i.e., Kinetics Market and Small Cap go up and down completely randomly.

Pair Corralation between Kinetics Market and Small Cap

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 1.64 times more return on investment than Small Cap. However, Kinetics Market is 1.64 times more volatile than Small Cap Core. It trades about -0.01 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.35 per unit of risk. If you would invest  7,779  in Kinetics Market Opportunities on October 15, 2024 and sell it today you would lose (61.00) from holding Kinetics Market Opportunities or give up 0.78% of portfolio value over 90 days.

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

Kinetics Market Opportunities  vs.  Small Cap Core

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.

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Kinetics Market and Small Cap

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

The idea behind Kinetics Market Opportunities and Small Cap Core 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.