Correlation Between Kinetics Small and Finisterre Unconstrained

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

Diversification Opportunities for Kinetics Small and Finisterre Unconstrained

0.18

Correlation Coefficient

Kinetics Small  Finisterre Unconstrained

Average diversification

The 3 months correlation between Kinetics and Finisterre is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Finisterre Unconstrained Emerg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finisterre Unconstrained 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 Finisterre Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finisterre Unconstrained has no effect on the direction of Kinetics Small i.e., Kinetics Small and Finisterre Unconstrained go up and down completely randomly.

Pair Corralation between Kinetics Small and Finisterre Unconstrained

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 9.61 times more return on investment than Finisterre Unconstrained. However, Kinetics Small is 9.61 times more volatile than Finisterre Unconstrained Emerging. It trades about 0.34 of its potential returns per unit of risk. Finisterre Unconstrained Emerging is currently generating about 0.1 per unit of risk. If you would invest  14,415  in Kinetics Small Cap on September 4, 2024 and sell it today you would earn a total of  7,463  from holding Kinetics Small Cap or generate 51.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Kinetics Small Cap  vs.  Finisterre Unconstrained Emerg

Kinetics Small Cap

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 26 (%) 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.

Finisterre Unconstrained

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Finisterre Unconstrained Emerging are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Finisterre Unconstrained 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 Finisterre Unconstrained

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

The idea behind Kinetics Small Cap and Finisterre Unconstrained Emerging 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.