Correlation Between LPL Financial and Perella Weinberg

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Can any of the company-specific risk be diversified away by investing in both LPL Financial and Perella Weinberg 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 LPL Financial and Perella Weinberg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPL Financial Holdings and Perella Weinberg Partners, you can compare the effects of market volatilities on LPL Financial and Perella Weinberg 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 LPL Financial with a short position of Perella Weinberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPL Financial and Perella Weinberg.

Diversification Opportunities for LPL Financial and Perella Weinberg

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between LPL and Perella is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Perella Weinberg Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perella Weinberg Partners and LPL Financial 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 LPL Financial Holdings are associated (or correlated) with Perella Weinberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perella Weinberg Partners has no effect on the direction of LPL Financial i.e., LPL Financial and Perella Weinberg go up and down completely randomly.

Pair Corralation between LPL Financial and Perella Weinberg

Given the investment horizon of 90 days LPL Financial is expected to generate 1.96 times less return on investment than Perella Weinberg. But when comparing it to its historical volatility, LPL Financial Holdings is 1.21 times less risky than Perella Weinberg. It trades about 0.09 of its potential returns per unit of risk. Perella Weinberg Partners is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,129  in Perella Weinberg Partners on August 24, 2024 and sell it today you would earn a total of  1,448  from holding Perella Weinberg Partners or generate 128.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

LPL Financial Holdings  vs.  Perella Weinberg Partners

 Performance 
       Timeline  
LPL Financial Holdings 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.
Perella Weinberg Partners 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Perella Weinberg Partners are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Perella Weinberg reported solid returns over the last few months and may actually be approaching a breakup point.

LPL Financial and Perella Weinberg Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LPL Financial and Perella Weinberg

The main advantage of trading using opposite LPL Financial and Perella Weinberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPL Financial position performs unexpectedly, Perella Weinberg 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 Perella Weinberg will offset losses from the drop in Perella Weinberg's long position.
The idea behind LPL Financial Holdings and Perella Weinberg Partners 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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