Correlation Between Kinetics Small and World Energy
Can any of the company-specific risk be diversified away by investing in both Kinetics Small and World Energy 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 World Energy 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 World Energy Fund, you can compare the effects of market volatilities on Kinetics Small and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and World Energy.
Diversification Opportunities for Kinetics Small and World Energy
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Kinetics and World is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Kinetics Small i.e., Kinetics Small and World Energy go up and down completely randomly.
Pair Corralation between Kinetics Small and World Energy
Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.5 times more return on investment than World Energy. However, Kinetics Small is 1.5 times more volatile than World Energy Fund. It trades about 0.4 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.18 per unit of risk. If you would invest 15,081 in Kinetics Small Cap on August 25, 2024 and sell it today you would earn a total of 8,906 from holding Kinetics Small Cap or generate 59.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinetics Small Cap vs. World Energy Fund
Performance |
| Timeline |
| Kinetics Small Cap |
| World Energy |
Kinetics Small and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinetics Small and World Energy
The main advantage of trading using opposite Kinetics Small and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Kinetics Small vs. Kinetics Global Fund | Kinetics Small vs. Kinetics Global Fund | Kinetics Small vs. Kinetics Paradigm Fund | Kinetics Small vs. Kinetics Internet Fund |
| World Energy vs. Small Cap Value | World Energy vs. Kinetics Small Cap | World Energy vs. Artisan Small Cap | World Energy vs. Chartwell Small Cap |
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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