Correlation Between Kinetics Paradigm and Foreign Smaller

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

Diversification Opportunities for Kinetics Paradigm and Foreign Smaller

-0.81

Correlation Coefficient

Kinetics Paradigm  Foreign Smaller

Pay attention - limited upside

The 3 months correlation between Kinetics and Foreign is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Foreign Smaller Panies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Smaller Panies 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 Foreign Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Smaller Panies has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Foreign Smaller go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Foreign Smaller

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 2.88 times more return on investment than Foreign Smaller. However, Kinetics Paradigm is 2.88 times more volatile than Foreign Smaller Panies. It trades about 0.4 of its potential returns per unit of risk. Foreign Smaller Panies is currently generating about -0.08 per unit of risk. If you would invest  10,363  in Kinetics Paradigm Fund on September 2, 2024 and sell it today you would earn a total of  7,922  from holding Kinetics Paradigm Fund or generate 76.45% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  Foreign Smaller Panies

Kinetics Paradigm

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 31 (%) 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.

Foreign Smaller Panies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foreign Smaller Panies has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Foreign Smaller 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 Foreign Smaller

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

The idea behind Kinetics Paradigm Fund and Foreign Smaller Panies 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.