Correlation Between Kinetics Small and Sterling Capital

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

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

Diversification Opportunities for Kinetics Small and Sterling Capital

-0.59

Correlation Coefficient

Kinetics Small  Sterling Capital

Excellent diversification

The 3 months correlation between Kinetics and Sterling is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Sterling Capital North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital North and Kinetics Small 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 Small Cap are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital North has no effect on the direction of Kinetics Small i.e., Kinetics Small and Sterling Capital go up and down completely randomly.

Pair Corralation between Kinetics Small and Sterling Capital

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 10.86 times more return on investment than Sterling Capital. However, Kinetics Small is 10.86 times more volatile than Sterling Capital North. It trades about 0.4 of its potential returns per unit of risk. Sterling Capital North is currently generating about 0.0 per unit of risk. If you would invest  14,141  in Kinetics Small Cap on August 31, 2024 and sell it today you would earn a total of  8,425  from holding Kinetics Small Cap or generate 59.58% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Sterling Capital North

Kinetics Small Cap

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Small showed solid returns over the last few months and may actually be approaching a breakup point.

Sterling Capital North

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital North has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sterling Capital 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 Small and Sterling Capital

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

The idea behind Kinetics Small Cap and Sterling Capital North 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.