Correlation Between Lgm Risk and Kinetics Small

Can any of the company-specific risk be diversified away by investing in both Lgm Risk and Kinetics Small 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 Lgm Risk and Kinetics Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lgm Risk Managed and Kinetics Small Cap, you can compare the effects of market volatilities on Lgm Risk and Kinetics Small 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 Lgm Risk with a short position of Kinetics Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lgm Risk and Kinetics Small.

Diversification Opportunities for Lgm Risk and Kinetics Small

0.23

Correlation Coefficient

Lgm Risk  Kinetics Small

Modest diversification

The 3 months correlation between Lgm and Kinetics is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lgm Risk Managed and Kinetics Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Small Cap and Lgm Risk 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 Lgm Risk Managed are associated (or correlated) with Kinetics Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Small Cap has no effect on the direction of Lgm Risk i.e., Lgm Risk and Kinetics Small go up and down completely randomly.

Pair Corralation between Lgm Risk and Kinetics Small

Assuming the 90 days horizon Lgm Risk Managed is expected to under-perform the Kinetics Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lgm Risk Managed is 5.62 times less risky than Kinetics Small. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Kinetics Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17,905  in Kinetics Small Cap on December 20, 2024 and sell it today you would earn a total of  1,855  from holding Kinetics Small Cap or generate 10.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Lgm Risk Managed  vs.  Kinetics Small Cap

Lgm Risk Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lgm Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lgm Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetics Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 7 (%) 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.

Pair Trading with Lgm Risk and Kinetics Small

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

The idea behind Lgm Risk Managed and Kinetics Small Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.