Correlation Between Dow Jones and Kinetics Paradigm
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Kinetics Paradigm 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 Dow Jones and Kinetics Paradigm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Kinetics Paradigm Fund, you can compare the effects of market volatilities on Dow Jones and Kinetics Paradigm 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 Dow Jones with a short position of Kinetics Paradigm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Kinetics Paradigm.
Diversification Opportunities for Dow Jones and Kinetics Paradigm
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Kinetics is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Kinetics Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Paradigm has no effect on the direction of Dow Jones i.e., Dow Jones and Kinetics Paradigm go up and down completely randomly.
Pair Corralation between Dow Jones and Kinetics Paradigm
Assuming the 90 days trading horizon Dow Jones is expected to generate 10.16 times less return on investment than Kinetics Paradigm. But when comparing it to its historical volatility, Dow Jones Industrial is 2.8 times less risky than Kinetics Paradigm. It trades about 0.11 of its potential returns per unit of risk. Kinetics Paradigm Fund is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 13,304 in Kinetics Paradigm Fund on October 21, 2024 and sell it today you would earn a total of 2,082 from holding Kinetics Paradigm Fund or generate 15.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Kinetics Paradigm Fund
Performance |
| Timeline |
Dow Jones and Kinetics Paradigm Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Kinetics Paradigm Fund
Pair trading matchups for Kinetics Paradigm
Pair Trading with Dow Jones and Kinetics Paradigm
The main advantage of trading using opposite Dow Jones and Kinetics Paradigm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Kinetics Paradigm 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 Paradigm will offset losses from the drop in Kinetics Paradigm's long position.| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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