Correlation Between World Energy and Lgm Risk
Can any of the company-specific risk be diversified away by investing in both World Energy and Lgm Risk 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 World Energy and Lgm Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Lgm Risk Managed, you can compare the effects of market volatilities on World Energy and Lgm Risk 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 World Energy with a short position of Lgm Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Lgm Risk.
Diversification Opportunities for World Energy and Lgm Risk
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between World and Lgm is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Lgm Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lgm Risk Managed and World Energy 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 World Energy Fund are associated (or correlated) with Lgm Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lgm Risk Managed has no effect on the direction of World Energy i.e., World Energy and Lgm Risk go up and down completely randomly.
Pair Corralation between World Energy and Lgm Risk
Assuming the 90 days horizon World Energy Fund is expected to generate 3.09 times more return on investment than Lgm Risk. However, World Energy is 3.09 times more volatile than Lgm Risk Managed. It trades about 0.05 of its potential returns per unit of risk. Lgm Risk Managed is currently generating about 0.15 per unit of risk. If you would invest 1,289 in World Energy Fund on September 15, 2024 and sell it today you would earn a total of 188.00 from holding World Energy Fund or generate 14.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Lgm Risk Managed
Performance |
| Timeline |
| World Energy |
| Lgm Risk Managed |
World Energy and Lgm Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Lgm Risk
The main advantage of trading using opposite World Energy and Lgm Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Lgm Risk 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 Lgm Risk will offset losses from the drop in Lgm Risk's long position.| World Energy vs. Jennison Natural Resources | World Energy vs. Icon Natural Resources | World Energy vs. Tortoise Energy Independence | World Energy vs. Clearbridge Energy Mlp |
| Lgm Risk vs. Hennessy Bp Energy | Lgm Risk vs. Invesco Energy Fund | Lgm Risk vs. World Energy Fund | Lgm Risk vs. Jennison Natural Resources |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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