Correlation Between Vanguard Small-cap and Kinetics Global

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

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

Diversification Opportunities for Vanguard Small-cap and Kinetics Global

0.93

Correlation Coefficient

Vanguard Small-cap  Kinetics Global

Almost no diversification

The 3 months correlation between Vanguard and Kinetics is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Kinetics Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Global and Vanguard Small-cap 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 Vanguard Small Cap Value 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 Vanguard Small-cap i.e., Vanguard Small-cap and Kinetics Global go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Kinetics Global

Assuming the 90 days horizon Vanguard Small-cap is expected to generate 3.27 times less return on investment than Kinetics Global. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.41 times less risky than Kinetics Global. It trades about 0.18 of its potential returns per unit of risk. Kinetics Global Fund is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  1,255  in Kinetics Global Fund on August 31, 2024 and sell it today you would earn a total of  547.00  from holding Kinetics Global Fund or generate 43.59% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Kinetics Global Fund

Vanguard Small Cap

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Kinetics Global

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Global Fund are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small-cap and Kinetics Global

The main advantage of trading using opposite Vanguard Small-cap and Kinetics Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap 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 Vanguard Small Cap Value 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.