Correlation Between Kinetics Small and Midcap Growth

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

Diversification Opportunities for Kinetics Small and Midcap Growth

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Kinetics and Midcap is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap 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 Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Kinetics Small i.e., Kinetics Small and Midcap Growth go up and down completely randomly.

Pair Corralation between Kinetics Small and Midcap Growth

Assuming the 90 days horizon Kinetics Small is expected to generate 1.87 times less return on investment than Midcap Growth. In addition to that, Kinetics Small is 2.19 times more volatile than Midcap Growth Fund. It trades about 0.12 of its total potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.48 per unit of volatility. If you would invest  1,050  in Midcap Growth Fund on October 23, 2024 and sell it today you would earn a total of  152.00  from holding Midcap Growth Fund or generate 14.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy41.67%
ValuesDaily Returns

Kinetics Small Cap  vs.  Midcap Growth Fund

 Performance 
       Timeline  
Kinetics Small Cap 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 9 (%) 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.
Midcap Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Strong
Over the last 90 days Midcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Kinetics Small and Midcap Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kinetics Small and Midcap Growth

The main advantage of trading using opposite Kinetics Small and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Midcap 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 Midcap Growth will offset losses from the drop in Midcap Growth's long position.
The idea behind Kinetics Small Cap and Midcap Growth 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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