Correlation Between Kinetics Small and Dunham Dynamic

Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Dunham 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 Small and Dunham Dynamic 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 Dunham Dynamic Macro, you can compare the effects of market volatilities on Kinetics Small and Dunham 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 Small with a short position of Dunham Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Dunham Dynamic.

Diversification Opportunities for Kinetics Small and Dunham Dynamic

0.33

Correlation Coefficient

Kinetics Small  Dunham Dynamic

Weak diversification

The 3 months correlation between Kinetics and Dunham is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Dunham Dynamic Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Dynamic Macro 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 Dunham Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Dynamic Macro has no effect on the direction of Kinetics Small i.e., Kinetics Small and Dunham Dynamic go up and down completely randomly.

Pair Corralation between Kinetics Small and Dunham Dynamic

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 11.61 times more return on investment than Dunham Dynamic. However, Kinetics Small is 11.61 times more volatile than Dunham Dynamic Macro. It trades about 0.07 of its potential returns per unit of risk. Dunham Dynamic Macro is currently generating about 0.0 per unit of risk. If you would invest  17,437  in Kinetics Small Cap on December 30, 2024 and sell it today you would earn a total of  1,498  from holding Kinetics Small Cap or generate 8.59% 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.  Dunham Dynamic Macro

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.

Dunham Dynamic Macro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dunham Dynamic Macro has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dunham 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 Small and Dunham Dynamic

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

The idea behind Kinetics Small Cap and Dunham Dynamic Macro 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.