Correlation Between Kinetics Paradigm and Marsico Focus

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

Diversification Opportunities for Kinetics Paradigm and Marsico Focus

0.34

Correlation Coefficient

Kinetics Paradigm  Marsico Focus

Weak diversification

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

Pair Corralation between Kinetics Paradigm and Marsico Focus

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to under-perform the Marsico Focus. In addition to that, Kinetics Paradigm is 1.84 times more volatile than Marsico Focus. It trades about -0.05 of its total potential returns per unit of risk. Marsico Focus is currently generating about -0.08 per unit of volatility. If you would invest  3,201  in Marsico Focus on December 1, 2024 and sell it today you would lose (239.00) from holding Marsico Focus or give up 7.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Kinetics Paradigm Fund  vs.  Marsico Focus

Kinetics Paradigm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinetics Paradigm Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Marsico Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marsico Focus has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Kinetics Paradigm and Marsico Focus

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

The idea behind Kinetics Paradigm Fund and Marsico Focus 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.