Correlation Between Deutsche Real and Kinetics Paradigm

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

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

Diversification Opportunities for Deutsche Real and Kinetics Paradigm

-0.17

Correlation Coefficient

Deutsche Real  Kinetics Paradigm

Good diversification

The 3 months correlation between Deutsche and Kinetics is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Real Estate and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm and Deutsche Real 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 Deutsche Real Estate are associated (or correlated) with Kinetics Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Paradigm has no effect on the direction of Deutsche Real i.e., Deutsche Real and Kinetics Paradigm go up and down completely randomly.

Pair Corralation between Deutsche Real and Kinetics Paradigm

Assuming the 90 days horizon Deutsche Real Estate is expected to generate 0.17 times more return on investment than Kinetics Paradigm. However, Deutsche Real Estate is 5.99 times less risky than Kinetics Paradigm. It trades about -0.02 of its potential returns per unit of risk. Kinetics Paradigm Fund is currently generating about -0.08 per unit of risk. If you would invest  2,297  in Deutsche Real Estate on September 16, 2024 and sell it today you would lose (8.00) from holding Deutsche Real Estate or give up 0.35% of portfolio value over 90 days.

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

Deutsche Real Estate  vs.  Kinetics Paradigm Fund

Deutsche Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Deutsche Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Kinetics Paradigm

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Real and Kinetics Paradigm

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

The idea behind Deutsche Real Estate and Kinetics Paradigm 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.