Correlation Between Pzena International and Kinetics Global

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

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

Diversification Opportunities for Pzena International and Kinetics Global

-0.32

Correlation Coefficient

Pzena International  Kinetics Global

Very good diversification

The 3 months correlation between Pzena and Kinetics is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pzena International Small and Kinetics Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Global and Pzena International 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 Pzena International Small are associated (or correlated) with Kinetics Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Global has no effect on the direction of Pzena International i.e., Pzena International and Kinetics Global go up and down completely randomly.

Pair Corralation between Pzena International and Kinetics Global

Assuming the 90 days horizon Pzena International Small is expected to under-perform the Kinetics Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pzena International Small is 1.07 times less risky than Kinetics Global. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Kinetics Global Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,244  in Kinetics Global Fund on October 10, 2024 and sell it today you would earn a total of  279.00  from holding Kinetics Global Fund or generate 22.43% return on investment over 90 days.

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

Pzena International Small  vs.  Kinetics Global Fund

Pzena International Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pzena International Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Kinetics Global

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Global Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pzena International and Kinetics Global

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

The idea behind Pzena International Small and Kinetics Global 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.