Correlation Between Kinetics Paradigm and Target Managed

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

Diversification Opportunities for Kinetics Paradigm and Target Managed

0.74

Correlation Coefficient

Kinetics Paradigm  Target Managed

Poor diversification

The 3 months correlation between Kinetics and Target is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Paradigm Fund and Target Managed Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Managed Allocation 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 Target Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Managed Allocation has no effect on the direction of Kinetics Paradigm i.e., Kinetics Paradigm and Target Managed go up and down completely randomly.

Pair Corralation between Kinetics Paradigm and Target Managed

Assuming the 90 days horizon Kinetics Paradigm Fund is expected to generate 2.42 times more return on investment than Target Managed. However, Kinetics Paradigm is 2.42 times more volatile than Target Managed Allocation. It trades about -0.02 of its potential returns per unit of risk. Target Managed Allocation is currently generating about -0.11 per unit of risk. If you would invest  16,205  in Kinetics Paradigm Fund on January 23, 2025 and sell it today you would lose (1,199) from holding Kinetics Paradigm Fund or give up 7.4% of portfolio value over 90 days.

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

Kinetics Paradigm Fund  vs.  Target Managed Allocation

Kinetics Paradigm

Risk-Adjusted Performance

Very Weak

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

Target Managed Allocation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Target Managed Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Kinetics Paradigm and Target Managed

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

The idea behind Kinetics Paradigm Fund and Target Managed Allocation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.