Correlation Between Kinetics Market and Wasatch Small

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

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

Diversification Opportunities for Kinetics Market and Wasatch Small

0.7

Correlation Coefficient

Kinetics Market  Wasatch Small

Poor diversification

The 3 months correlation between Kinetics and Wasatch is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and Wasatch Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Small Cap and Kinetics Market 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 Market Opportunities are associated (or correlated) with Wasatch Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Small Cap has no effect on the direction of Kinetics Market i.e., Kinetics Market and Wasatch Small go up and down completely randomly.

Pair Corralation between Kinetics Market and Wasatch Small

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 1.09 times more return on investment than Wasatch Small. However, Kinetics Market is 1.09 times more volatile than Wasatch Small Cap. It trades about 0.23 of its potential returns per unit of risk. Wasatch Small Cap is currently generating about -0.05 per unit of risk. If you would invest  5,460  in Kinetics Market Opportunities on September 16, 2024 and sell it today you would earn a total of  2,190  from holding Kinetics Market Opportunities or generate 40.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Kinetics Market Opportunities  vs.  Wasatch Small Cap

Kinetics Market Oppo

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Market showed solid returns over the last few months and may actually be approaching a breakup point.

Wasatch Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Kinetics Market and Wasatch Small

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

The idea behind Kinetics Market Opportunities and Wasatch 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.