Correlation Between Tekla Healthcare and Kinetics Small

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

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

Diversification Opportunities for Tekla Healthcare and Kinetics Small

-0.64

Correlation Coefficient

Tekla Healthcare  Kinetics Small

Excellent diversification

The 3 months correlation between Tekla and Kinetics is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Kinetics Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Small Cap and Tekla Healthcare 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 Tekla Healthcare Opportunities are associated (or correlated) with Kinetics Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Small Cap has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Kinetics Small go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Kinetics Small

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to under-perform the Kinetics Small. But the fund apears to be less risky and, when comparing its historical volatility, Tekla Healthcare Opportunities is 2.05 times less risky than Kinetics Small. The fund trades about -0.16 of its potential returns per unit of risk. The Kinetics Small Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  15,810  in Kinetics Small Cap on September 19, 2024 and sell it today you would earn a total of  3,205  from holding Kinetics Small Cap or generate 20.27% return on investment over 90 days.

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

Tekla Healthcare Opportunities  vs.  Kinetics Small Cap

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with latest inconsistent performance, the Fund's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the fund retail investors.

Kinetics Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Small Cap are ranked lower than 10 (%) 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.

Pair Trading with Tekla Healthcare and Kinetics Small

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

The idea behind Tekla Healthcare Opportunities and Kinetics Small Cap 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.