Correlation Between Lkcm Small and Df Dent
Can any of the company-specific risk be diversified away by investing in both Lkcm Small and Df Dent 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 Lkcm Small and Df Dent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lkcm Small Cap and Df Dent Small, you can compare the effects of market volatilities on Lkcm Small and Df Dent 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 Lkcm Small with a short position of Df Dent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lkcm Small and Df Dent.
Diversification Opportunities for Lkcm Small and Df Dent
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lkcm and DFDSX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Small Cap and Df Dent Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Df Dent Small and Lkcm Small 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 Lkcm Small Cap are associated (or correlated) with Df Dent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Df Dent Small has no effect on the direction of Lkcm Small i.e., Lkcm Small and Df Dent go up and down completely randomly.
Pair Corralation between Lkcm Small and Df Dent
Assuming the 90 days horizon Lkcm Small is expected to generate 1.15 times less return on investment than Df Dent. In addition to that, Lkcm Small is 1.06 times more volatile than Df Dent Small. It trades about 0.04 of its total potential returns per unit of risk. Df Dent Small is currently generating about 0.05 per unit of volatility. If you would invest 2,251 in Df Dent Small on November 3, 2024 and sell it today you would earn a total of 267.00 from holding Df Dent Small or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lkcm Small Cap vs. Df Dent Small
Performance |
| Timeline |
| Lkcm Small Cap |
| Df Dent Small |
Lkcm Small and Df Dent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lkcm Small and Df Dent
The main advantage of trading using opposite Lkcm Small and Df Dent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lkcm Small position performs unexpectedly, Df Dent 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 Df Dent will offset losses from the drop in Df Dent's long position.The idea behind Lkcm Small Cap and Df Dent Small 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.| Df Dent vs. John Hancock Money | Df Dent vs. Gabelli Global Financial | Df Dent vs. Schwab Government Money | Df Dent vs. Angel Oak Financial |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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