Correlation Between Sp Midcap and Kinetics Small

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

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

Diversification Opportunities for Sp Midcap and Kinetics Small

0.49

Correlation Coefficient

Sp Midcap  Kinetics Small

Very weak diversification

The 3 months correlation between SPMIX and Kinetics is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index 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 Sp Midcap 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 Sp Midcap Index 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 Sp Midcap i.e., Sp Midcap and Kinetics Small go up and down completely randomly.

Pair Corralation between Sp Midcap and Kinetics Small

Assuming the 90 days horizon Sp Midcap Index is expected to generate 0.45 times more return on investment than Kinetics Small. However, Sp Midcap Index is 2.21 times less risky than Kinetics Small. It trades about -0.26 of its potential returns per unit of risk. Kinetics Small Cap is currently generating about -0.22 per unit of risk. If you would invest  2,720  in Sp Midcap Index on October 6, 2024 and sell it today you would lose (148.00) from holding Sp Midcap Index or give up 5.44% of portfolio value over 90 days.

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

Sp Midcap Index  vs.  Kinetics Small Cap

Sp Midcap Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Kinetics Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 6 (%) 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 Sp Midcap and Kinetics Small

The main advantage of trading using opposite Sp Midcap and Kinetics Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap 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 Sp Midcap Index 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.