Correlation Between Kinetics Small and Schwab Short-term

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

Diversification Opportunities for Kinetics Small and Schwab Short-term

0.3

Correlation Coefficient

Kinetics Small  Schwab Short-term

Weak diversification

The 3 months correlation between Kinetics and Schwab is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Schwab Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Short Term 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 Schwab Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Short Term has no effect on the direction of Kinetics Small i.e., Kinetics Small and Schwab Short-term go up and down completely randomly.

Pair Corralation between Kinetics Small and Schwab Short-term

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 13.96 times more return on investment than Schwab Short-term. However, Kinetics Small is 13.96 times more volatile than Schwab Short Term Bond. It trades about 0.07 of its potential returns per unit of risk. Schwab Short Term Bond is currently generating about 0.21 per unit of risk. If you would invest  18,054  in Kinetics Small Cap on December 27, 2024 and sell it today you would earn a total of  1,453  from holding Kinetics Small Cap or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Kinetics Small Cap  vs.  Schwab Short Term Bond

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.

Schwab Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Short Term Bond are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Schwab Short-term 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 Schwab Short-term

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

The idea behind Kinetics Small Cap and Schwab Short Term Bond 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.