Correlation Between Kinetics Paradigm and European Equity

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

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

Diversification Opportunities for Kinetics Paradigm and European Equity

0.38

Correlation Coefficient

Kinetics Paradigm  European Equity

Weak diversification

The 3 months correlation between Kinetics and European is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed and Kinetics Paradigm 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 Kinetics Paradigm Fund are associated (or correlated) with European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and European Equity go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and European Equity

Assuming the 90 days horizon Kinetics Paradigm is expected to generate 1.0 times less return on investment than European Equity. In addition to that, Kinetics Paradigm is 2.82 times more volatile than European Equity Closed. It trades about 0.08 of its total potential returns per unit of risk. European Equity Closed is currently generating about 0.23 per unit of volatility. If you would invest  814.00  in European Equity Closed on December 30, 2024 and sell it today you would earn a total of  105.00  from holding European Equity Closed or generate 12.9% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  European Equity Closed

Kinetics Paradigm

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund 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 Paradigm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

European Equity Closed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in European Equity Closed are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kinetics Paradigm and European Equity

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

The idea behind Kinetics Paradigm Fund and European Equity Closed 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.