Correlation Between Kinetics Small and Buffalo International

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

Diversification Opportunities for Kinetics Small and Buffalo International

-0.83

Correlation Coefficient

Kinetics Small  Buffalo International

Pay attention - limited upside

The 3 months correlation between Kinetics and Buffalo is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Buffalo International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo International 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 Buffalo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo International has no effect on the direction of Kinetics Small i.e., Kinetics Small and Buffalo International go up and down completely randomly.

Pair Corralation between Kinetics Small and Buffalo International

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 2.39 times more return on investment than Buffalo International. However, Kinetics Small is 2.39 times more volatile than Buffalo International. It trades about 0.38 of its potential returns per unit of risk. Buffalo International is currently generating about -0.09 per unit of risk. If you would invest  12,674  in Kinetics Small Cap on September 3, 2024 and sell it today you would earn a total of  7,207  from holding Kinetics Small Cap or generate 56.86% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Buffalo International

Kinetics Small Cap

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Small showed solid returns over the last few months and may actually be approaching a breakup point.

Buffalo International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buffalo International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Buffalo International 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 Buffalo International

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

The idea behind Kinetics Small Cap and Buffalo International 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 Global Correlations module to find global opportunities by holding instruments from different markets.