Correlation Between Kinetics Small and Vanguard Small-cap

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

Diversification Opportunities for Kinetics Small and Vanguard Small-cap

0.35

Correlation Coefficient

Kinetics Small  Vanguard Small-cap

Weak diversification

The 3 months correlation between Kinetics and Vanguard is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Kinetics Small i.e., Kinetics Small and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Kinetics Small and Vanguard Small-cap

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.51 times more return on investment than Vanguard Small-cap. However, Kinetics Small is 1.51 times more volatile than Vanguard Small Cap Growth. It trades about 0.08 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about -0.11 per unit of risk. If you would invest  17,398  in Kinetics Small Cap on December 31, 2024 and sell it today you would earn a total of  1,537  from holding Kinetics Small Cap or generate 8.83% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Vanguard Small Cap Growth

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 6 (%) 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 May 2025.

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Kinetics Small and Vanguard Small-cap

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

The idea behind Kinetics Small Cap and Vanguard Small Cap Growth 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.