Correlation Between Kinetics Small and Valic Company

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

Diversification Opportunities for Kinetics Small and Valic Company

0.89

Correlation Coefficient

Kinetics Small  Valic Company

Very poor diversification

The 3 months correlation between Kinetics and Valic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Valic Company I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valic Company I 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 Valic Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valic Company I has no effect on the direction of Kinetics Small i.e., Kinetics Small and Valic Company go up and down completely randomly.

Pair Corralation between Kinetics Small and Valic Company

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.89 times more return on investment than Valic Company. However, Kinetics Small is 1.89 times more volatile than Valic Company I. It trades about 0.19 of its potential returns per unit of risk. Valic Company I is currently generating about 0.1 per unit of risk. If you would invest  13,652  in Kinetics Small Cap on September 13, 2024 and sell it today you would earn a total of  4,226  from holding Kinetics Small Cap or generate 30.96% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Valic Company I

Kinetics Small Cap

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 15 (%) 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.

Valic Company I

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Valic Company may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kinetics Small and Valic Company

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

The idea behind Kinetics Small Cap and Valic Company I 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.