Correlation Between Kinetics Small and Aggressive Growth

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

Diversification Opportunities for Kinetics Small and Aggressive Growth

0.87

Correlation Coefficient

Kinetics Small  Aggressive Growth

Very poor diversification

The 3 months correlation between Kinetics and Aggressive is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Aggressive Growth Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Kinetics Small i.e., Kinetics Small and Aggressive Growth go up and down completely randomly.

Pair Corralation between Kinetics Small and Aggressive Growth

Assuming the 90 days horizon Kinetics Small Cap is expected to under-perform the Aggressive Growth. In addition to that, Kinetics Small is 1.44 times more volatile than Aggressive Growth Portfolio. It trades about -0.42 of its total potential returns per unit of risk. Aggressive Growth Portfolio is currently generating about -0.19 per unit of volatility. If you would invest  10,198  in Aggressive Growth Portfolio on October 3, 2024 and sell it today you would lose (712.00) from holding Aggressive Growth Portfolio or give up 6.98% of portfolio value over 90 days.

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

Kinetics Small Cap  vs.  Aggressive Growth Portfolio

Kinetics Small Cap

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 4 (%) 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 February 2025.

Aggressive Growth

Risk-Adjusted Performance

2 of 100

Insignificant

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

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

The idea behind Kinetics Small Cap and Aggressive Growth 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.