Correlation Between Kinetics Paradigm and Parnassus Core

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

By analyzing existing cross correlation between Kinetics Paradigm Fund and Parnassus E Equity, you can compare the effects of market volatilities on Kinetics Paradigm and Parnassus Core 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 Paradigm with a short position of Parnassus Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Paradigm and Parnassus Core.

Diversification Opportunities for Kinetics Paradigm and Parnassus Core

0.83

Correlation Coefficient

Kinetics Paradigm  Parnassus Core

Very poor diversification

The 3 months correlation between Kinetics and Parnassus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Parnassus E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus E Equity and Kinetics Paradigm 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 Paradigm Fund are associated (or correlated) with Parnassus Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus E Equity has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Parnassus Core go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Parnassus Core

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 3.17 times more return on investment than Parnassus Core. However, Kinetics Paradigm is 3.17 times more volatile than Parnassus E Equity. It trades about 0.42 of its potential returns per unit of risk. Parnassus E Equity is currently generating about 0.16 per unit of risk. If you would invest  9,848  in Kinetics Paradigm Fund on August 31, 2024 and sell it today you would earn a total of  7,835  from holding Kinetics Paradigm Fund or generate 79.56% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  Parnassus E Equity

Kinetics Paradigm

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 33 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Parnassus E Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus E Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Parnassus Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kinetics Paradigm and Parnassus Core

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

The idea behind Kinetics Paradigm Fund and Parnassus E Equity 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.