Correlation Between Lsv Small and Applied Finance
Can any of the company-specific risk be diversified away by investing in both Lsv Small and Applied Finance 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 Lsv Small and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lsv Small Cap and Applied Finance Explorer, you can compare the effects of market volatilities on Lsv Small and Applied Finance 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 Lsv Small with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Small and Applied Finance.
Diversification Opportunities for Lsv Small and Applied Finance
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lsv and Applied is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer and Lsv 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 Lsv Small Cap are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Lsv Small i.e., Lsv Small and Applied Finance go up and down completely randomly.
Pair Corralation between Lsv Small and Applied Finance
Assuming the 90 days horizon Lsv Small Cap is expected to generate 1.07 times more return on investment than Applied Finance. However, Lsv Small is 1.07 times more volatile than Applied Finance Explorer. It trades about 0.2 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.2 per unit of risk. If you would invest 1,938 in Lsv Small Cap on August 31, 2024 and sell it today you would earn a total of 137.00 from holding Lsv Small Cap or generate 7.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lsv Small Cap vs. Applied Finance Explorer
Performance |
| Timeline |
| Lsv Small Cap |
| Applied Finance Explorer |
Lsv Small and Applied Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lsv Small and Applied Finance
The main advantage of trading using opposite Lsv Small and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lsv Small position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.| Lsv Small vs. Vanguard Small Cap Value | Lsv Small vs. Vanguard Small Cap Value | Lsv Small vs. Us Targeted Value | Lsv Small vs. Undiscovered Managers Behavioral |
| Applied Finance vs. Vanguard Small Cap Value | Applied Finance vs. Vanguard Small Cap Value | Applied Finance vs. Us Targeted Value | Applied Finance vs. Undiscovered Managers Behavioral |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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