Correlation Between Kinetics Small and Gmo Small
Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Gmo 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 Kinetics Small and Gmo Small 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 Gmo Small Cap, you can compare the effects of market volatilities on Kinetics Small and Gmo 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 Kinetics Small with a short position of Gmo Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Gmo Small.
Diversification Opportunities for Kinetics Small and Gmo Small
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kinetics and Gmo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap 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 Gmo Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Kinetics Small i.e., Kinetics Small and Gmo Small go up and down completely randomly.
Pair Corralation between Kinetics Small and Gmo Small
Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.22 times more return on investment than Gmo Small. However, Kinetics Small is 1.22 times more volatile than Gmo Small Cap. It trades about 0.0 of its potential returns per unit of risk. Gmo Small Cap is currently generating about -0.04 per unit of risk. If you would invest 18,346 in Kinetics Small Cap on January 12, 2025 and sell it today you would lose (233.00) from holding Kinetics Small Cap or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Kinetics Small Cap vs. Gmo Small Cap
Performance |
| Timeline |
| Kinetics Small Cap |
| Gmo Small Cap |
Kinetics Small and Gmo Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinetics Small and Gmo Small
The main advantage of trading using opposite Kinetics Small and Gmo Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Gmo 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 Gmo Small will offset losses from the drop in Gmo Small'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 |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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