Correlation Between Kennedy Capital and Short Duration

Can any of the company-specific risk be diversified away by investing in both Kennedy Capital and Short Duration 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 Kennedy Capital and Short Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kennedy Capital Small and Short Duration Inflation, you can compare the effects of market volatilities on Kennedy Capital and Short Duration 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 Kennedy Capital with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kennedy Capital and Short Duration.

Diversification Opportunities for Kennedy Capital and Short Duration

0.12

Correlation Coefficient

Kennedy Capital  Short Duration

Average diversification

The 3 months correlation between Kennedy and Short is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kennedy Capital Small and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation and Kennedy Capital 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 Kennedy Capital Small are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of Kennedy Capital i.e., Kennedy Capital and Short Duration go up and down completely randomly.

Pair Corralation between Kennedy Capital and Short Duration

Assuming the 90 days horizon Kennedy Capital Small is expected to under-perform the Short Duration. In addition to that, Kennedy Capital is 2.48 times more volatile than Short Duration Inflation. It trades about -0.12 of its total potential returns per unit of risk. Short Duration Inflation is currently generating about -0.22 per unit of volatility. If you would invest  1,051  in Short Duration Inflation on September 22, 2024 and sell it today you would lose (26.00) from holding Short Duration Inflation or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Kennedy Capital Small  vs.  Short Duration Inflation

Kennedy Capital Small

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kennedy Capital Small are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Kennedy Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kennedy Capital and Short Duration

The main advantage of trading using opposite Kennedy Capital and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kennedy Capital position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.

The idea behind Kennedy Capital Small and Short Duration Inflation 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.