Correlation Between Kinetics Small and Investec Global

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

Diversification Opportunities for Kinetics Small and Investec Global

0.09

Correlation Coefficient

Kinetics Small  Investec Global

Significant diversification

The 3 months correlation between Kinetics and Investec is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Investec Global Franchise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Global Franchise 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 Investec Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Global Franchise has no effect on the direction of Kinetics Small i.e., Kinetics Small and Investec Global go up and down completely randomly.

Pair Corralation between Kinetics Small and Investec Global

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 3.48 times more return on investment than Investec Global. However, Kinetics Small is 3.48 times more volatile than Investec Global Franchise. It trades about 0.11 of its potential returns per unit of risk. Investec Global Franchise is currently generating about 0.13 per unit of risk. If you would invest  19,154  in Kinetics Small Cap on December 2, 2024 and sell it today you would earn a total of  788.00  from holding Kinetics Small Cap or generate 4.11% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Investec Global Franchise

Kinetics Small Cap

Risk-Adjusted Performance

Very Weak

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

Investec Global Franchise

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Global Franchise are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Investec Global 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 Investec Global

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

The idea behind Kinetics Small Cap and Investec Global Franchise 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.