Correlation Between Kinetics Small and Nova Fund

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

Diversification Opportunities for Kinetics Small and Nova Fund

0.89

Correlation Coefficient

Kinetics Small  Nova Fund

Very poor diversification

The 3 months correlation between Kinetics and Nova is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Nova Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Investor 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 Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Investor has no effect on the direction of Kinetics Small i.e., Kinetics Small and Nova Fund go up and down completely randomly.

Pair Corralation between Kinetics Small and Nova Fund

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 2.14 times more return on investment than Nova Fund. However, Kinetics Small is 2.14 times more volatile than Nova Fund Investor. It trades about 0.4 of its potential returns per unit of risk. Nova Fund Investor is currently generating about 0.17 per unit of risk. If you would invest  18,428  in Kinetics Small Cap on August 31, 2024 and sell it today you would earn a total of  4,723  from holding Kinetics Small Cap or generate 25.63% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Nova Fund Investor

Kinetics Small Cap

Risk-Adjusted Performance

31 of 100

Strong

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

Nova Fund Investor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nova Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kinetics Small and Nova Fund

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

The idea behind Kinetics Small Cap and Nova Fund Investor 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.