Correlation Between Kinetics Small and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Kinetics Small and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Dow Jones.
Diversification Opportunities for Kinetics Small and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kinetics and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Kinetics Small i.e., Kinetics Small and Dow Jones go up and down completely randomly.
Pair Corralation between Kinetics Small and Dow Jones
Assuming the 90 days horizon Kinetics Small Cap is expected to generate 2.25 times more return on investment than Dow Jones. However, Kinetics Small is 2.25 times more volatile than Dow Jones Industrial. It trades about 0.23 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 10,678 in Kinetics Small Cap on August 25, 2024 and sell it today you would earn a total of 13,309 from holding Kinetics Small Cap or generate 124.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinetics Small Cap vs. Dow Jones Industrial
Performance |
| Timeline |
Kinetics Small and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Kinetics Small Cap
Pair trading matchups for Kinetics Small
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Kinetics Small and Dow Jones
The main advantage of trading using opposite Kinetics Small and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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