Correlation Between Lgm Risk and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Lgm Risk and Absolute Convertible 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 Lgm Risk and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lgm Risk Managed and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Lgm Risk and Absolute Convertible 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 Lgm Risk with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lgm Risk and Absolute Convertible.
Diversification Opportunities for Lgm Risk and Absolute Convertible
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lgm and Absolute is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lgm Risk Managed and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Lgm Risk 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 Lgm Risk Managed are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Lgm Risk i.e., Lgm Risk and Absolute Convertible go up and down completely randomly.
Pair Corralation between Lgm Risk and Absolute Convertible
Assuming the 90 days horizon Lgm Risk Managed is expected to generate 0.72 times more return on investment than Absolute Convertible. However, Lgm Risk Managed is 1.39 times less risky than Absolute Convertible. It trades about 0.16 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about -0.14 per unit of risk. If you would invest 1,143 in Lgm Risk Managed on September 15, 2024 and sell it today you would earn a total of 8.00 from holding Lgm Risk Managed or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lgm Risk Managed vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Lgm Risk Managed |
| Absolute Convertible |
Lgm Risk and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lgm Risk and Absolute Convertible
The main advantage of trading using opposite Lgm Risk and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lgm Risk position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Lgm Risk vs. Hennessy Bp Energy | Lgm Risk vs. Invesco Energy Fund | Lgm Risk vs. World Energy Fund | Lgm Risk vs. Jennison Natural Resources |
| Absolute Convertible vs. Calvert High Yield | Absolute Convertible vs. California High Yield Municipal | Absolute Convertible vs. Lgm Risk Managed | Absolute Convertible vs. Intal High Relative |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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