Correlation Between Small Pany and Kinetics Small

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

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

Diversification Opportunities for Small Pany and Kinetics Small

0.97

Correlation Coefficient

Small Pany  Kinetics Small

Almost no diversification

The 3 months correlation between Small and Kinetics is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth 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 Small Pany 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 Small Pany Growth 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 Small Pany i.e., Small Pany and Kinetics Small go up and down completely randomly.

Pair Corralation between Small Pany and Kinetics Small

Assuming the 90 days horizon Small Pany Growth is expected to generate 0.75 times more return on investment than Kinetics Small. However, Small Pany Growth is 1.34 times less risky than Kinetics Small. It trades about 0.53 of its potential returns per unit of risk. Kinetics Small Cap is currently generating about 0.4 per unit of risk. If you would invest  1,302  in Small Pany Growth on August 31, 2024 and sell it today you would earn a total of  340.00  from holding Small Pany Growth or generate 26.11% return on investment over 90 days.

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

Small Pany Growth  vs.  Kinetics Small Cap

Small Pany Growth

Risk-Adjusted Performance

27 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Kinetics Small Cap

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 31 (%) 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.

Pair Trading with Small Pany and Kinetics Small

The main advantage of trading using opposite Small Pany and Kinetics Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Pany 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 Small Pany Growth 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .