Correlation Between Sp 500 and Lgm Risk
Can any of the company-specific risk be diversified away by investing in both Sp 500 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 Sp 500 and Lgm Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Equal and Lgm Risk Managed, you can compare the effects of market volatilities on Sp 500 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 Sp 500 with a short position of Lgm Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Lgm Risk.
Diversification Opportunities for Sp 500 and Lgm Risk
Almost no diversification
The 3 months correlation between INDEX and Lgm is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Equal 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 Sp 500 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 Sp 500 Equal 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 Sp 500 i.e., Sp 500 and Lgm Risk go up and down completely randomly.
Pair Corralation between Sp 500 and Lgm Risk
Assuming the 90 days horizon Sp 500 Equal is expected to generate 2.45 times more return on investment than Lgm Risk. However, Sp 500 is 2.45 times more volatile than Lgm Risk Managed. It trades about 0.38 of its potential returns per unit of risk. Lgm Risk Managed is currently generating about 0.37 per unit of risk. If you would invest 5,454 in Sp 500 Equal on September 4, 2024 and sell it today you would earn a total of 325.00 from holding Sp 500 Equal or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sp 500 Equal vs. Lgm Risk Managed
Performance |
| Timeline |
| Sp 500 Equal |
| Lgm Risk Managed |
Sp 500 and Lgm Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Lgm Risk
The main advantage of trading using opposite Sp 500 and Lgm Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 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.| Sp 500 vs. Ab Bond Inflation | Sp 500 vs. Lord Abbett Inflation | Sp 500 vs. T Rowe Price | Sp 500 vs. Aqr Managed Futures |
| Lgm Risk vs. Fuller Thaler Behavioral | Lgm Risk vs. The Gabelli Small | Lgm Risk vs. Davenport Small Cap | Lgm Risk vs. Northern Small Cap |
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.
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