Correlation Between Kinetics Small and Nasdaq 100

Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Nasdaq 100 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 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 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Nasdaq 100.

Diversification Opportunities for Kinetics Small and Nasdaq 100

0.61

Correlation Coefficient

Kinetics Small  Nasdaq 100

Poor diversification

The 3 months correlation between Kinetics and Nasdaq is 0.61. 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. 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 go up and down completely randomly.

Pair Corralation between Kinetics Small and Nasdaq 100

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.77 times more return on investment than Nasdaq 100. However, Kinetics Small is 1.77 times more volatile than Nasdaq 100 Index Fund. It trades about 0.24 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.03 per unit of risk. If you would invest  14,397  in Kinetics Small Cap on September 12, 2024 and sell it today you would earn a total of  5,509  from holding Kinetics Small Cap or generate 38.26% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Nasdaq 100 Index Fund

Kinetics Small Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Small showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq 100 Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Nasdaq 100 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 Nasdaq 100

The main advantage of trading using opposite Kinetics Small and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Nasdaq 100 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 will offset losses from the drop in Nasdaq 100'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.