Correlation Between Kinetics Small and Gotham Absolute
Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Gotham Absolute 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 Small and Gotham Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kinetics Small Cap and Gotham Absolute Return, you can compare the effects of market volatilities on Kinetics Small and Gotham Absolute 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 Small with a short position of Gotham Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Gotham Absolute.
Diversification Opportunities for Kinetics Small and Gotham Absolute
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kinetics and Gotham is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Gotham Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Absolute Return and Kinetics Small 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 Small Cap are associated (or correlated) with Gotham Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Absolute Return has no effect on the direction of Kinetics Small i.e., Kinetics Small and Gotham Absolute go up and down completely randomly.
Pair Corralation between Kinetics Small and Gotham Absolute
Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.64 times more return on investment than Gotham Absolute. However, Kinetics Small is 1.64 times more volatile than Gotham Absolute Return. It trades about 0.08 of its potential returns per unit of risk. Gotham Absolute Return is currently generating about 0.03 per unit of risk. If you would invest 10,990 in Kinetics Small Cap on November 28, 2024 and sell it today you would earn a total of 7,401 from holding Kinetics Small Cap or generate 67.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinetics Small Cap vs. Gotham Absolute Return
Performance |
| Timeline |
| Kinetics Small Cap |
| Gotham Absolute Return |
Kinetics Small and Gotham Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinetics Small and Gotham Absolute
The main advantage of trading using opposite Kinetics Small and Gotham Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Gotham Absolute 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 Gotham Absolute will offset losses from the drop in Gotham Absolute's long position.| Kinetics Small vs. Kinetics Paradigm Fund | Kinetics Small vs. Kinetics Market Opportunities | Kinetics Small vs. Pear Tree Polaris | Kinetics Small vs. Amg Managers Loomis |
| Gotham Absolute vs. Schwab Health Care | Gotham Absolute vs. Eaton Vance Worldwide | Gotham Absolute vs. Baron Health Care | Gotham Absolute vs. Blackrock Health Sciences |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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