Correlation Between The Fairholme and Kinetics Paradigm
Can any of the company-specific risk be diversified away by investing in both The Fairholme 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 The Fairholme and Kinetics Paradigm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Fairholme Fund and Kinetics Paradigm Fund, you can compare the effects of market volatilities on The Fairholme 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 The Fairholme with a short position of Kinetics Paradigm. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Fairholme and Kinetics Paradigm.
Diversification Opportunities for The Fairholme and Kinetics Paradigm
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between The and Kinetics is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Fund and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and The Fairholme 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 The Fairholme Fund 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 The Fairholme i.e., The Fairholme and Kinetics Paradigm go up and down completely randomly.
Pair Corralation between The Fairholme and Kinetics Paradigm
Assuming the 90 days horizon The Fairholme Fund is expected to under-perform the Kinetics Paradigm. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Fairholme Fund is 1.3 times less risky than Kinetics Paradigm. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Kinetics Paradigm Fund is currently generating about 0.74 of returns per unit of risk over similar time horizon. If you would invest 13,116 in Kinetics Paradigm Fund on August 24, 2024 and sell it today you would earn a total of 4,366 from holding Kinetics Paradigm Fund or generate 33.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Fairholme Fund vs. Kinetics Paradigm Fund
Performance |
| Timeline |
| The Fairholme |
| Kinetics Paradigm |
The Fairholme and Kinetics Paradigm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Fairholme and Kinetics Paradigm
The main advantage of trading using opposite The Fairholme and Kinetics Paradigm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Fairholme 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.| The Fairholme vs. Dunham Real Estate | The Fairholme vs. Real Estate Fund | The Fairholme vs. Great West Real Estate | The Fairholme vs. Tiaa Cref Real Estate |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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