Correlation Between Kinetics Small and Target 2005

Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Target 2005 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 Target 2005 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 Target 2005 Fund, you can compare the effects of market volatilities on Kinetics Small and Target 2005 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 Target 2005. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Target 2005.

Diversification Opportunities for Kinetics Small and Target 2005

0.42

Correlation Coefficient

Kinetics Small  Target 2005

Very weak diversification

The 3 months correlation between Kinetics and Target is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Target 2005 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 2005 Fund 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 Target 2005. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target 2005 Fund has no effect on the direction of Kinetics Small i.e., Kinetics Small and Target 2005 go up and down completely randomly.

Pair Corralation between Kinetics Small and Target 2005

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 7.63 times more return on investment than Target 2005. However, Kinetics Small is 7.63 times more volatile than Target 2005 Fund. It trades about 0.38 of its potential returns per unit of risk. Target 2005 Fund is currently generating about 0.15 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Kinetics Small Cap  vs.  Target 2005 Fund

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.

Target 2005 Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target 2005 Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target 2005 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 Target 2005

The main advantage of trading using opposite Kinetics Small and Target 2005 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Target 2005 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 Target 2005 will offset losses from the drop in Target 2005's long position.

The idea behind Kinetics Small Cap and Target 2005 Fund 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.