Correlation Between Kinetics Small and Nasdaq-100 Index

Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Nasdaq-100 Index 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 Small and Nasdaq-100 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kinetics Small Cap and Nasdaq 100 Index Fund, you can compare the effects of market volatilities on Kinetics Small and Nasdaq-100 Index 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 Small with a short position of Nasdaq-100 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Nasdaq-100 Index.

Diversification Opportunities for Kinetics Small and Nasdaq-100 Index

0.32

Correlation Coefficient

Kinetics Small  Nasdaq-100 Index

Weak diversification

The 3 months correlation between Kinetics and NASDAQ-100 is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index and Kinetics Small 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 Small Cap are associated (or correlated) with Nasdaq-100 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Index has no effect on the direction of Kinetics Small i.e., Kinetics Small and Nasdaq-100 Index go up and down completely randomly.

Pair Corralation between Kinetics Small and Nasdaq-100 Index

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.5 times more return on investment than Nasdaq-100 Index. However, Kinetics Small is 1.5 times more volatile than Nasdaq 100 Index Fund. It trades about 0.09 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about -0.07 per unit of risk. If you would invest  17,004  in Kinetics Small Cap on December 29, 2024 and sell it today you would earn a total of  1,818  from holding Kinetics Small Cap or generate 10.69% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Nasdaq 100 Index Fund

Kinetics Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Small may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nasdaq 100 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 Index 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.

Pair Trading with Kinetics Small and Nasdaq-100 Index

The main advantage of trading using opposite Kinetics Small and Nasdaq-100 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Nasdaq-100 Index 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 Nasdaq-100 Index will offset losses from the drop in Nasdaq-100 Index's long position.

The idea behind Kinetics Small Cap and Nasdaq 100 Index Fund 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.