Correlation Between Northern Small and Kinetics Small
Can any of the company-specific risk be diversified away by investing in both Northern Small 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 Northern Small and Kinetics Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and Kinetics Small Cap, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of Kinetics Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Kinetics Small.
Diversification Opportunities for Northern Small and Kinetics Small
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Kinetics is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap 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 Northern 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 Northern Small Cap 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 Northern Small i.e., Northern Small and Kinetics Small go up and down completely randomly.
Pair Corralation between Northern Small and Kinetics Small
Assuming the 90 days horizon Northern Small is expected to generate 8.02 times less return on investment than Kinetics Small. But when comparing it to its historical volatility, Northern Small Cap is 1.39 times less risky than Kinetics Small. It trades about 0.02 of its potential returns per unit of risk. Kinetics Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 11,488 in Kinetics Small Cap on September 20, 2024 and sell it today you would earn a total of 6,513 from holding Kinetics Small Cap or generate 56.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Kinetics Small Cap
Performance |
| Timeline |
| Northern Small Cap |
| Kinetics Small Cap |
Northern Small and Kinetics Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Kinetics Small
The main advantage of trading using opposite Northern Small and Kinetics Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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.| Northern Small vs. American Beacon Large | Northern Small vs. Harbor International Fund | Northern Small vs. Credit Suisse Modity | Northern Small vs. Metropolitan West Total |
| Kinetics Small vs. Northern Small Cap | Kinetics Small vs. Palm Valley Capital | Kinetics Small vs. Royce Opportunity Fund | Kinetics Small vs. Fpa Queens Road |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Transaction History View history of all your transactions and understand their impact on performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |