Correlation Between Kinetics Paradigm and Invesco High

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

Diversification Opportunities for Kinetics Paradigm and Invesco High

0.87

Correlation Coefficient

Kinetics Paradigm  Invesco High

Very poor diversification

The 3 months correlation between Kinetics and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Invesco High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Income 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Income has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Invesco High go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Invesco High

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 28.89 times more return on investment than Invesco High. However, Kinetics Paradigm is 28.89 times more volatile than Invesco High Income. It trades about 0.44 of its potential returns per unit of risk. Invesco High Income is currently generating about 0.28 per unit of risk. If you would invest  13,458  in Kinetics Paradigm Fund on August 29, 2024 and sell it today you would earn a total of  4,753  from holding Kinetics Paradigm Fund or generate 35.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Kinetics Paradigm Fund  vs.  Invesco High Income

Kinetics Paradigm

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 28 (%) 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 High Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco High Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Invesco High is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kinetics Paradigm and Invesco High

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

The idea behind Kinetics Paradigm Fund and Invesco High Income 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 Global Correlations module to find global opportunities by holding instruments from different markets.