Correlation Between Kinetics Paradigm and Diamond Hill

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

By analyzing existing cross correlation between Kinetics Paradigm Fund and Diamond Hill International, you can compare the effects of market volatilities on Kinetics Paradigm and Diamond Hill 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 Paradigm with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Paradigm and Diamond Hill.

Diversification Opportunities for Kinetics Paradigm and Diamond Hill

0.26

Correlation Coefficient

Kinetics Paradigm  Diamond Hill

Modest diversification

The 3 months correlation between Kinetics and Diamond is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Diamond Hill International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Interna and Kinetics Paradigm 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 Paradigm Fund are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Interna has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Diamond Hill go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Diamond Hill

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 3.15 times more return on investment than Diamond Hill. However, Kinetics Paradigm is 3.15 times more volatile than Diamond Hill International. It trades about 0.08 of its potential returns per unit of risk. Diamond Hill International is currently generating about 0.1 per unit of risk. If you would invest  11,308  in Kinetics Paradigm Fund on December 30, 2024 and sell it today you would earn a total of  1,222  from holding Kinetics Paradigm Fund or generate 10.81% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  Diamond Hill International

Kinetics Paradigm

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Paradigm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Diamond Hill Interna

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill International are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Diamond Hill 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 Paradigm and Diamond Hill

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

The idea behind Kinetics Paradigm Fund and Diamond Hill International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.