Correlation Between Kinetics Paradigm and Paradigm Value

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

Diversification Opportunities for Kinetics Paradigm and Paradigm Value

0.73

Correlation Coefficient

Kinetics Paradigm  Paradigm Value

Poor diversification

The 3 months correlation between Kinetics and Paradigm is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Paradigm Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Value 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 Paradigm Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Value has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Paradigm Value go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Paradigm Value

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 1.96 times more return on investment than Paradigm Value. However, Kinetics Paradigm is 1.96 times more volatile than Paradigm Value Fund. It trades about 0.36 of its potential returns per unit of risk. Paradigm Value Fund is currently generating about 0.13 per unit of risk. If you would invest  10,267  in Kinetics Paradigm Fund on September 4, 2024 and sell it today you would earn a total of  7,128  from holding Kinetics Paradigm Fund or generate 69.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Kinetics Paradigm Fund  vs.  Paradigm Value Fund

Kinetics Paradigm

Risk-Adjusted Performance

28 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Paradigm Value

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm Value Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Paradigm Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kinetics Paradigm and Paradigm Value

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

The idea behind Kinetics Paradigm Fund and Paradigm Value 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.