Correlation Between Kinetics Paradigm and Davis Global

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

By analyzing existing cross correlation between Kinetics Paradigm Fund and Davis Global Fund, you can compare the effects of market volatilities on Kinetics Paradigm and Davis Global 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 Paradigm with a short position of Davis Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Paradigm and Davis Global.

Diversification Opportunities for Kinetics Paradigm and Davis Global

0.64

Correlation Coefficient

Kinetics Paradigm  Davis Global

Poor diversification

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

Pair Corralation between Kinetics Paradigm and Davis Global

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 1.77 times more return on investment than Davis Global. However, Kinetics Paradigm is 1.77 times more volatile than Davis Global Fund. It trades about 0.4 of its potential returns per unit of risk. Davis Global Fund is currently generating about 0.16 per unit of risk. If you would invest  10,363  in Kinetics Paradigm Fund on September 2, 2024 and sell it today you would earn a total of  7,922  from holding Kinetics Paradigm Fund or generate 76.45% return on investment over 90 days.

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

Kinetics Paradigm Fund  vs.  Davis Global Fund

Kinetics Paradigm

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund 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 Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Davis Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Global Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davis Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinetics Paradigm and Davis Global

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

The idea behind Kinetics Paradigm Fund and Davis Global 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.