Correlation Between Lsv Small and Pace Large
Can any of the company-specific risk be diversified away by investing in both Lsv Small and Pace Large 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 Pace Large 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 Pace Large Value, you can compare the effects of market volatilities on Lsv Small and Pace Large 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 Pace Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Small and Pace Large.
Diversification Opportunities for Lsv Small and Pace Large
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lsv and Pace is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Pace Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Value 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 Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Value has no effect on the direction of Lsv Small i.e., Lsv Small and Pace Large go up and down completely randomly.
Pair Corralation between Lsv Small and Pace Large
Assuming the 90 days horizon Lsv Small Cap is expected to generate 1.17 times more return on investment than Pace Large. However, Lsv Small is 1.17 times more volatile than Pace Large Value. It trades about 0.04 of its potential returns per unit of risk. Pace Large Value is currently generating about 0.04 per unit of risk. If you would invest 1,801 in Lsv Small Cap on November 4, 2024 and sell it today you would earn a total of 97.00 from holding Lsv Small Cap or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lsv Small Cap vs. Pace Large Value
Performance |
| Timeline |
| Lsv Small Cap |
| Pace Large Value |
Lsv Small and Pace Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lsv Small and Pace Large
The main advantage of trading using opposite Lsv Small and Pace Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lsv Small position performs unexpectedly, Pace Large 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 Pace Large will offset losses from the drop in Pace Large's long position.| Lsv Small vs. Amg Timessquare Mid | Lsv Small vs. Lsv Value Equity | Lsv Small vs. Baron Discovery Fund | Lsv Small vs. Victory Sycamore Established |
| Pace Large vs. International Investors Gold | Pace Large vs. Great West Goldman Sachs | Pace Large vs. Short Precious Metals | Pace Large vs. James Balanced Golden |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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