Correlation Between Kinetics Paradigm and Davenport Small

Can any of the company-specific risk be diversified away by investing in both Kinetics Paradigm and Davenport 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 Kinetics Paradigm and Davenport Small 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 Davenport Small Cap, you can compare the effects of market volatilities on Kinetics Paradigm and Davenport 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 Kinetics Paradigm with a short position of Davenport Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Paradigm and Davenport Small.

Diversification Opportunities for Kinetics Paradigm and Davenport Small

0.92

Correlation Coefficient

Kinetics Paradigm  Davenport Small

Almost no diversification

The 3 months correlation between Kinetics and Davenport is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Davenport Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport Small Cap 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 Davenport Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport Small Cap has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Davenport Small go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Davenport Small

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 2.11 times more return on investment than Davenport Small. However, Kinetics Paradigm is 2.11 times more volatile than Davenport Small Cap. It trades about 0.4 of its potential returns per unit of risk. Davenport Small Cap 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Kinetics Paradigm Fund  vs.  Davenport Small Cap

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.

Davenport Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davenport Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kinetics Paradigm and Davenport Small

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

The idea behind Kinetics Paradigm Fund and Davenport 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.