Correlation Between Kinetics Paradigm and Barrow Hanley

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

Diversification Opportunities for Kinetics Paradigm and Barrow Hanley

-0.41

Correlation Coefficient

Kinetics Paradigm  Barrow Hanley

Very good diversification

The 3 months correlation between Kinetics and Barrow is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Barrow Hanley Concentrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrow Hanley Concen 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 Barrow Hanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrow Hanley Concen has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Barrow Hanley go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Barrow Hanley

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 1.55 times more return on investment than Barrow Hanley. However, Kinetics Paradigm is 1.55 times more volatile than Barrow Hanley Concentrated. It trades about 0.14 of its potential returns per unit of risk. Barrow Hanley Concentrated is currently generating about -0.17 per unit of risk. If you would invest  9,505  in Kinetics Paradigm Fund on September 30, 2024 and sell it today you would earn a total of  2,466  from holding Kinetics Paradigm Fund or generate 25.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Kinetics Paradigm Fund  vs.  Barrow Hanley Concentrated

Kinetics Paradigm

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Barrow Hanley Concen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrow Hanley Concentrated 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 forward 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.

Pair Trading with Kinetics Paradigm and Barrow Hanley

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

The idea behind Kinetics Paradigm Fund and Barrow Hanley Concentrated 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.