Correlation Between Kinetics Paradigm and Invesco Small

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

Diversification Opportunities for Kinetics Paradigm and Invesco Small

0.94

Correlation Coefficient

Kinetics Paradigm  Invesco Small

Almost no diversification

The 3 months correlation between Kinetics and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 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 Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Invesco Small go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Invesco Small

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 1.86 times more return on investment than Invesco Small. However, Kinetics Paradigm is 1.86 times more volatile than Invesco Small Cap. It trades about 0.4 of its potential returns per unit of risk. Invesco Small Cap is currently generating about 0.21 per unit of risk. If you would invest  10,363  in Kinetics Paradigm Fund on September 3, 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.  Invesco 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.

Invesco Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Invesco Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinetics Paradigm and Invesco Small

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

The idea behind Kinetics Paradigm Fund and Invesco 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.