Correlation Between Midcap Fund and Kinetics Paradigm

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

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

Diversification Opportunities for Midcap Fund and Kinetics Paradigm

0.45

Correlation Coefficient

Midcap Fund  Kinetics Paradigm

Very weak diversification

The 3 months correlation between Midcap and Kinetics is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and Midcap Fund 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 Midcap Fund Institutional are associated (or correlated) with Kinetics Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Paradigm has no effect on the direction of Midcap Fund i.e., Midcap Fund and Kinetics Paradigm go up and down completely randomly.

Pair Corralation between Midcap Fund and Kinetics Paradigm

Assuming the 90 days horizon Midcap Fund Institutional is expected to under-perform the Kinetics Paradigm. But the mutual fund apears to be less risky and, when comparing its historical volatility, Midcap Fund Institutional is 2.52 times less risky than Kinetics Paradigm. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Kinetics Paradigm Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,858  in Kinetics Paradigm Fund on December 23, 2024 and sell it today you would earn a total of  514.00  from holding Kinetics Paradigm Fund or generate 4.33% return on investment over 90 days.

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

Midcap Fund Institutional  vs.  Kinetics Paradigm Fund

Midcap Fund Institutional

Risk-Adjusted Performance

Very Weak

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

Kinetics Paradigm

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Paradigm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Midcap Fund and Kinetics Paradigm

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

The idea behind Midcap Fund Institutional and Kinetics Paradigm Fund 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.