Correlation Between Kinetics Paradigm and Sp 500

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Can any of the company-specific risk be diversified away by investing in both Kinetics Paradigm and Sp 500 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 Sp 500 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 Sp 500 Index, you can compare the effects of market volatilities on Kinetics Paradigm and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Paradigm and Sp 500.

Diversification Opportunities for Kinetics Paradigm and Sp 500

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Kinetics and USPRX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Sp 500 go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Sp 500

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 3.95 times more return on investment than Sp 500. However, Kinetics Paradigm is 3.95 times more volatile than Sp 500 Index. It trades about 0.16 of its potential returns per unit of risk. Sp 500 Index is currently generating about 0.1 per unit of risk. If you would invest  11,020  in Kinetics Paradigm Fund on September 20, 2024 and sell it today you would earn a total of  3,090  from holding Kinetics Paradigm Fund or generate 28.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Kinetics Paradigm Fund  vs.  Sp 500 Index

 Performance 
       Timeline  
Kinetics Paradigm 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 12 (%) 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.
Sp 500 Index 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sp 500 Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sp 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetics Paradigm and Sp 500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kinetics Paradigm and Sp 500

The main advantage of trading using opposite Kinetics Paradigm and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Paradigm position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.
The idea behind Kinetics Paradigm Fund and Sp 500 Index 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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