Correlation Between Kinetics Market and Vanguard Small

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

Diversification Opportunities for Kinetics Market and Vanguard Small

0.93

Correlation Coefficient

Kinetics Market  Vanguard Small

Almost no diversification

The 3 months correlation between Kinetics and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 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 Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Kinetics Market i.e., Kinetics Market and Vanguard Small go up and down completely randomly.

Pair Corralation between Kinetics Market and Vanguard Small

Assuming the 90 days horizon Kinetics Market Opportunities is expected to under-perform the Vanguard Small. In addition to that, Kinetics Market is 3.78 times more volatile than Vanguard Small Cap Growth. It trades about -0.04 of its total potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.27 per unit of volatility. If you would invest  7,883  in Vanguard Small Cap Growth on September 16, 2024 and sell it today you would earn a total of  407.00  from holding Vanguard Small Cap Growth or generate 5.16% return on investment over 90 days.

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

Kinetics Market Opportunities  vs.  Vanguard Small Cap 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.

Vanguard Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kinetics Market and Vanguard Small

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

The idea behind Kinetics Market Opportunities and Vanguard Small Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.