Correlation Between Adams Natural and Kinetics Internet

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

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

Diversification Opportunities for Adams Natural and Kinetics Internet

-0.08

Correlation Coefficient

Adams Natural  Kinetics Internet

Good diversification

The 3 months correlation between Adams and Kinetics is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Kinetics Internet Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Internet and Adams Natural 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 Adams Natural Resources are associated (or correlated) with Kinetics Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Internet has no effect on the direction of Adams Natural i.e., Adams Natural and Kinetics Internet go up and down completely randomly.

Pair Corralation between Adams Natural and Kinetics Internet

Considering the 90-day investment horizon Adams Natural Resources is expected to generate 0.38 times more return on investment than Kinetics Internet. However, Adams Natural Resources is 2.64 times less risky than Kinetics Internet. It trades about -0.09 of its potential returns per unit of risk. Kinetics Internet Fund is currently generating about -0.05 per unit of risk. If you would invest  2,275  in Adams Natural Resources on October 9, 2024 and sell it today you would lose (38.00) from holding Adams Natural Resources or give up 1.67% of portfolio value over 90 days.

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

Adams Natural Resources  vs.  Kinetics Internet Fund

Adams Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adams Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy technical and fundamental indicators, Adams Natural is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Kinetics Internet

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Internet Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Internet showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adams Natural and Kinetics Internet

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

The idea behind Adams Natural Resources and Kinetics Internet 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.