Correlation Between Lkcm Small and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Lkcm Small and Sp Smallcap 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 Sp Smallcap 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 Sp Smallcap 600, you can compare the effects of market volatilities on Lkcm Small and Sp Smallcap 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 Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lkcm Small and Sp Smallcap.
Diversification Opportunities for Lkcm Small and Sp Smallcap
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lkcm and RYSVX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Small Cap and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Lkcm Small i.e., Lkcm Small and Sp Smallcap go up and down completely randomly.
Pair Corralation between Lkcm Small and Sp Smallcap
Assuming the 90 days horizon Lkcm Small Cap is expected to generate 0.79 times more return on investment than Sp Smallcap. However, Lkcm Small Cap is 1.27 times less risky than Sp Smallcap. It trades about 0.03 of its potential returns per unit of risk. Sp Smallcap 600 is currently generating about 0.02 per unit of risk. If you would invest 1,837 in Lkcm Small Cap on November 2, 2024 and sell it today you would earn a total of 312.00 from holding Lkcm Small Cap or generate 16.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lkcm Small Cap vs. Sp Smallcap 600
Performance |
| Timeline |
| Lkcm Small Cap |
| Sp Smallcap 600 |
Lkcm Small and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lkcm Small and Sp Smallcap
The main advantage of trading using opposite Lkcm Small and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lkcm Small position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.The idea behind Lkcm Small Cap and Sp Smallcap 600 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.| Sp Smallcap vs. Vanguard Small Cap Value | Sp Smallcap vs. Vanguard Small Cap Value | Sp Smallcap vs. Us Small Cap | Sp Smallcap vs. Us Targeted Value |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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