Correlation Between Kinetics Paradigm and Palmer Square

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

Diversification Opportunities for Kinetics Paradigm and Palmer Square

0.77

Correlation Coefficient

Kinetics Paradigm  Palmer Square

Poor diversification

The 3 months correlation between Kinetics and Palmer is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Palmer Square Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Ultra 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 Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Ultra has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Palmer Square go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Palmer Square

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 110.9 times more return on investment than Palmer Square. However, Kinetics Paradigm is 110.9 times more volatile than Palmer Square Ultra Short. It trades about 0.11 of its potential returns per unit of risk. Palmer Square Ultra Short is currently generating about 0.71 per unit of risk. If you would invest  11,934  in Kinetics Paradigm Fund on September 23, 2024 and sell it today you would earn a total of  2,289  from holding Kinetics Paradigm Fund or generate 19.18% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  Palmer Square Ultra Short

Kinetics Paradigm

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 8 (%) 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.

Palmer Square Ultra

Risk-Adjusted Performance

56 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ultra Short are ranked lower than 56 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kinetics Paradigm and Palmer Square

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

The idea behind Kinetics Paradigm Fund and Palmer Square Ultra Short 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.