Correlation Between Kinetics Market and Oil Gas

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

By analyzing existing cross correlation between Kinetics Market Opportunities and Oil Gas Ultrasector, you can compare the effects of market volatilities on Kinetics Market and Oil Gas 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 Market with a short position of Oil Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Market and Oil Gas.

Diversification Opportunities for Kinetics Market and Oil Gas

0.47

Correlation Coefficient

Kinetics Market  Oil Gas

Very weak diversification

The 3 months correlation between Kinetics and Oil is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities and Oil Gas Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Gas Ultrasector and Kinetics Market 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 Market Opportunities are associated (or correlated) with Oil Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Gas Ultrasector has no effect on the direction of Kinetics Market i.e., Kinetics Market and Oil Gas go up and down completely randomly.

Pair Corralation between Kinetics Market and Oil Gas

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 0.78 times more return on investment than Oil Gas. However, Kinetics Market Opportunities is 1.29 times less risky than Oil Gas. It trades about 0.6 of its potential returns per unit of risk. Oil Gas Ultrasector is currently generating about 0.04 per unit of risk. If you would invest  6,984  in Kinetics Market Opportunities on August 13, 2024 and sell it today you would earn a total of  1,420  from holding Kinetics Market Opportunities or generate 20.33% return on investment over 90 days.

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

Kinetics Market Opportunities  vs.  Oil Gas Ultrasector

Kinetics Market Oppo

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kinetics Market showed solid returns over the last few months and may actually be approaching a breakup point.

Oil Gas Ultrasector

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Gas Ultrasector are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oil Gas may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kinetics Market and Oil Gas

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

The idea behind Kinetics Market Opportunities and Oil Gas Ultrasector 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.