Correlation Between Kinetics Small and Global Core

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

Diversification Opportunities for Kinetics Small and Global Core

0.42

Correlation Coefficient

Kinetics Small  Global Core

Very weak diversification

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

Pair Corralation between Kinetics Small and Global Core

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.87 times more return on investment than Global Core. However, Kinetics Small is 1.87 times more volatile than Global E Portfolio. It trades about 0.09 of its potential returns per unit of risk. Global E Portfolio is currently generating about 0.1 per unit of risk. If you would invest  10,837  in Kinetics Small Cap on December 1, 2024 and sell it today you would earn a total of  9,105  from holding Kinetics Small Cap or generate 84.02% 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.  Global E Portfolio

Kinetics Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinetics Small Cap 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.

Global E Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global E Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Global Core 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 Global Core

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

The idea behind Kinetics Small Cap and Global E Portfolio 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 Stocks Directory module to find actively traded stocks across global markets.