Correlation Between Kinetics Paradigm and Locorr Dynamic

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

Diversification Opportunities for Kinetics Paradigm and Locorr Dynamic

0.8

Correlation Coefficient

Kinetics Paradigm  Locorr Dynamic

Very poor diversification

The 3 months correlation between Kinetics and Locorr is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Locorr Dynamic Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Dynamic Equity 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 Locorr Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Dynamic Equity has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Locorr Dynamic go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Locorr Dynamic

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to under-perform the Locorr Dynamic. In addition to that, Kinetics Paradigm is 5.13 times more volatile than Locorr Dynamic Equity. It trades about -0.13 of its total potential returns per unit of risk. Locorr Dynamic Equity is currently generating about -0.18 per unit of volatility. If you would invest  1,183  in Locorr Dynamic Equity on October 9, 2024 and sell it today you would lose (22.00) from holding Locorr Dynamic Equity or give up 1.86% of portfolio value over 90 days.

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

Kinetics Paradigm Fund  vs.  Locorr Dynamic Equity

Kinetics Paradigm

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Locorr Dynamic Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Dynamic Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Locorr Dynamic 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 Locorr Dynamic

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

The idea behind Kinetics Paradigm Fund and Locorr Dynamic Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.