Correlation Between Vanguard California and Kinetics Paradigm
Can any of the company-specific risk be diversified away by investing in both Vanguard California and Kinetics Paradigm 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 Vanguard California and Kinetics Paradigm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard California Long Term and Kinetics Paradigm Fund, you can compare the effects of market volatilities on Vanguard California and Kinetics Paradigm 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 Vanguard California with a short position of Kinetics Paradigm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and Kinetics Paradigm.
Diversification Opportunities for Vanguard California and Kinetics Paradigm
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VANGUARD and Kinetics is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Long Term and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and Vanguard California 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 Vanguard California Long Term are associated (or correlated) with Kinetics Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Paradigm has no effect on the direction of Vanguard California i.e., Vanguard California and Kinetics Paradigm go up and down completely randomly.
Pair Corralation between Vanguard California and Kinetics Paradigm
Assuming the 90 days horizon Vanguard California Long Term is expected to under-perform the Kinetics Paradigm. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard California Long Term is 7.74 times less risky than Kinetics Paradigm. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Kinetics Paradigm Fund is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 11,318 in Kinetics Paradigm Fund on September 3, 2024 and sell it today you would earn a total of 6,047 from holding Kinetics Paradigm Fund or generate 53.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard California Long Term vs. Kinetics Paradigm Fund
Performance |
| Timeline |
| Vanguard California |
| Kinetics Paradigm |
Vanguard California and Kinetics Paradigm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard California and Kinetics Paradigm
The main advantage of trading using opposite Vanguard California and Kinetics Paradigm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard California position performs unexpectedly, Kinetics Paradigm 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 Paradigm will offset losses from the drop in Kinetics Paradigm's long position.The idea behind Vanguard California Long Term and Kinetics Paradigm Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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