Correlation Between Lsv Small and Morningstar Municipal

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Can any of the company-specific risk be diversified away by investing in both Lsv Small and Morningstar Municipal 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 Morningstar Municipal 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 Morningstar Municipal Bond, you can compare the effects of market volatilities on Lsv Small and Morningstar Municipal 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 Morningstar Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Small and Morningstar Municipal.

Diversification Opportunities for Lsv Small and Morningstar Municipal

LsvMorningstarDiversified AwayLsvMorningstarDiversified Away100%
0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lsv and Morningstar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Morningstar Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Municipal 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 Morningstar Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Municipal has no effect on the direction of Lsv Small i.e., Lsv Small and Morningstar Municipal go up and down completely randomly.

Pair Corralation between Lsv Small and Morningstar Municipal

Assuming the 90 days horizon Lsv Small Cap is expected to under-perform the Morningstar Municipal. In addition to that, Lsv Small is 4.4 times more volatile than Morningstar Municipal Bond. It trades about -0.18 of its total potential returns per unit of risk. Morningstar Municipal Bond is currently generating about 0.16 per unit of volatility. If you would invest  991.00  in Morningstar Municipal Bond on November 23, 2024 and sell it today you would earn a total of  6.00  from holding Morningstar Municipal Bond or generate 0.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Lsv Small Cap  vs.  Morningstar Municipal Bond

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-8-6-4-202
JavaScript chart by amCharts 3.21.15LVAQX MSTPX
       Timeline  
Lsv Small Cap 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Lsv Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb18.51919.52020.5
Morningstar Municipal 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Morningstar Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Morningstar Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9.859.99.9510

Lsv Small and Morningstar Municipal Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.63-1.24-0.85-0.46-0.08120.190.580.971.361.75 24681012
JavaScript chart by amCharts 3.21.15LVAQX MSTPX
       Returns  

Pair Trading with Lsv Small and Morningstar Municipal

The main advantage of trading using opposite Lsv Small and Morningstar Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lsv Small position performs unexpectedly, Morningstar Municipal 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 Morningstar Municipal will offset losses from the drop in Morningstar Municipal's long position.
The idea behind Lsv Small Cap and Morningstar Municipal Bond 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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