Correlation Between Gmo Asset and Kinetics Small

Can any of the company-specific risk be diversified away by investing in both Gmo Asset 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 Gmo Asset and Kinetics Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gmo Asset Allocation and Kinetics Small Cap, you can compare the effects of market volatilities on Gmo Asset 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 Gmo Asset with a short position of Kinetics Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Asset and Kinetics Small.

Diversification Opportunities for Gmo Asset and Kinetics Small

-0.81

Correlation Coefficient

Gmo Asset  Kinetics Small

Pay attention - limited upside

The 3 months correlation between Gmo and Kinetics is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Asset Allocation 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 Gmo Asset 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 Gmo Asset Allocation 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 Gmo Asset i.e., Gmo Asset and Kinetics Small go up and down completely randomly.

Pair Corralation between Gmo Asset and Kinetics Small

Assuming the 90 days horizon Gmo Asset Allocation is expected to under-perform the Kinetics Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Asset Allocation is 1.86 times less risky than Kinetics Small. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Kinetics Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  13,235  in Kinetics Small Cap on September 15, 2024 and sell it today you would earn a total of  5,771  from holding Kinetics Small Cap or generate 43.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Gmo Asset Allocation  vs.  Kinetics Small Cap

Gmo Asset Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Asset Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Kinetics Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gmo Asset and Kinetics Small

The main advantage of trading using opposite Gmo Asset and Kinetics Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Asset 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.

The idea behind Gmo Asset Allocation and Kinetics Small Cap 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.