Correlation Between Kinetics Paradigm and Hodges Fund

Can any of the company-specific risk be diversified away by investing in both Kinetics Paradigm and Hodges Fund 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 Hodges Fund 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 Hodges Fund Retail, you can compare the effects of market volatilities on Kinetics Paradigm and Hodges Fund 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 Hodges Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Paradigm and Hodges Fund.

Diversification Opportunities for Kinetics Paradigm and Hodges Fund

0.63

Correlation Coefficient

Kinetics Paradigm  Hodges Fund

Poor diversification

The 3 months correlation between Kinetics and Hodges is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Hodges Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Fund Retail 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 Hodges Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Fund Retail has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Hodges Fund go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Hodges Fund

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 1.19 times more return on investment than Hodges Fund. However, Kinetics Paradigm is 1.19 times more volatile than Hodges Fund Retail. It trades about 0.08 of its potential returns per unit of risk. Hodges Fund Retail is currently generating about -0.04 per unit of risk. If you would invest  13,421  in Kinetics Paradigm Fund on December 30, 2024 and sell it today you would earn a total of  1,477  from holding Kinetics Paradigm Fund or generate 11.01% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  Hodges Fund Retail

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.

Hodges Fund Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hodges Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Hodges Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kinetics Paradigm and Hodges Fund

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

The idea behind Kinetics Paradigm Fund and Hodges Fund Retail 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.