Correlation Between Kinetics Small and Central Europe

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

Diversification Opportunities for Kinetics Small and Central Europe

0.42

Correlation Coefficient

Kinetics Small  Central Europe

Very weak diversification

The 3 months correlation between Kinetics and Central is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Central Europe Russia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Europe Russia 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 Central Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Europe Russia has no effect on the direction of Kinetics Small i.e., Kinetics Small and Central Europe go up and down completely randomly.

Pair Corralation between Kinetics Small and Central Europe

Assuming the 90 days horizon Kinetics Small is expected to generate 3.13 times less return on investment than Central Europe. But when comparing it to its historical volatility, Kinetics Small Cap is 1.42 times less risky than Central Europe. It trades about 0.07 of its potential returns per unit of risk. Central Europe Russia is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Central Europe Russia on December 30, 2024 and sell it today you would earn a total of  353.00  from holding Central Europe Russia or generate 31.32% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Central Europe Russia

Kinetics Small Cap

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 5 (%) 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.

Central Europe Russia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Europe Russia are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather fragile technical and fundamental indicators, Central Europe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinetics Small and Central Europe

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

The idea behind Kinetics Small Cap and Central Europe Russia 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.