Correlation Between Kinetics Small and Bridge Builder

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

Diversification Opportunities for Kinetics Small and Bridge Builder

-0.32

Correlation Coefficient

Kinetics Small  Bridge Builder

Very good diversification

The 3 months correlation between Kinetics and Bridge is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Bridge Builder Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder Municipal 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 Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder Municipal has no effect on the direction of Kinetics Small i.e., Kinetics Small and Bridge Builder go up and down completely randomly.

Pair Corralation between Kinetics Small and Bridge Builder

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 10.17 times more return on investment than Bridge Builder. However, Kinetics Small is 10.17 times more volatile than Bridge Builder Municipal. It trades about 0.38 of its potential returns per unit of risk. Bridge Builder Municipal is currently generating about 0.06 per unit of risk. If you would invest  14,501  in Kinetics Small Cap on September 3, 2024 and sell it today you would earn a total of  8,297  from holding Kinetics Small Cap or generate 57.22% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Bridge Builder Municipal

Kinetics Small Cap

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 30 (%) 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.

Bridge Builder Municipal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bridge Builder Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Bridge Builder 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 Bridge Builder

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

The idea behind Kinetics Small Cap and Bridge Builder Municipal 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.