Correlation Between General Money and Kinetics Small
Can any of the company-specific risk be diversified away by investing in both General Money and Kinetics Small 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 General Money and Kinetics Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Money Market and Kinetics Small Cap, you can compare the effects of market volatilities on General Money and Kinetics Small 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 General Money with a short position of Kinetics Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Money and Kinetics Small.
Diversification Opportunities for General Money and Kinetics Small
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Kinetics is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Money Market and Kinetics Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Small Cap and General Money 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 General Money Market are associated (or correlated) with Kinetics Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Small Cap has no effect on the direction of General Money i.e., General Money and Kinetics Small go up and down completely randomly.
Pair Corralation between General Money and Kinetics Small
Assuming the 90 days horizon General Money is expected to generate 35.3 times less return on investment than Kinetics Small. But when comparing it to its historical volatility, General Money Market is 6.18 times less risky than Kinetics Small. It trades about 0.05 of its potential returns per unit of risk. Kinetics Small Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 11,444 in Kinetics Small Cap on September 3, 2024 and sell it today you would earn a total of 11,354 from holding Kinetics Small Cap or generate 99.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.69% |
| Values | Daily Returns |
General Money Market vs. Kinetics Small Cap
Performance |
| Timeline |
| General Money Market |
| Kinetics Small Cap |
General Money and Kinetics Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Money and Kinetics Small
The main advantage of trading using opposite General Money and Kinetics Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Money position performs unexpectedly, Kinetics Small 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 Small will offset losses from the drop in Kinetics Small's long position.| General Money vs. Vanguard Total Stock | General Money vs. Vanguard 500 Index | General Money vs. Vanguard Total Stock | General Money vs. Vanguard Total Stock |
| Kinetics Small vs. General Money Market | Kinetics Small vs. Matson Money Equity | Kinetics Small vs. Ashmore Emerging Markets | Kinetics Small vs. Aig Government Money |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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