Correlation Between T Rowe and Lkcm Small-mid
Can any of the company-specific risk be diversified away by investing in both T Rowe and Lkcm Small-mid 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 T Rowe and Lkcm Small-mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T Rowe Price and Lkcm Small Mid Cap, you can compare the effects of market volatilities on T Rowe and Lkcm Small-mid 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 T Rowe with a short position of Lkcm Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Lkcm Small-mid.
Diversification Opportunities for T Rowe and Lkcm Small-mid
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PAMCX and Lkcm is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Lkcm Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Mid and T Rowe 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 T Rowe Price are associated (or correlated) with Lkcm Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Small Mid has no effect on the direction of T Rowe i.e., T Rowe and Lkcm Small-mid go up and down completely randomly.
Pair Corralation between T Rowe and Lkcm Small-mid
Assuming the 90 days horizon T Rowe is expected to generate 1.86 times less return on investment than Lkcm Small-mid. But when comparing it to its historical volatility, T Rowe Price is 1.25 times less risky than Lkcm Small-mid. It trades about 0.11 of its potential returns per unit of risk. Lkcm Small Mid Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 998.00 in Lkcm Small Mid Cap on September 1, 2024 and sell it today you would earn a total of 233.00 from holding Lkcm Small Mid Cap or generate 23.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
T Rowe Price vs. Lkcm Small Mid Cap
Performance |
| Timeline |
| T Rowe Price |
| Lkcm Small Mid |
T Rowe and Lkcm Small-mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rowe and Lkcm Small-mid
The main advantage of trading using opposite T Rowe and Lkcm Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Lkcm Small-mid 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 Lkcm Small-mid will offset losses from the drop in Lkcm Small-mid's long position.The idea behind T Rowe Price and Lkcm Small Mid Cap 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.| Lkcm Small-mid vs. California Bond Fund | Lkcm Small-mid vs. Ms Global Fixed | Lkcm Small-mid vs. Inflation Protected Bond Fund | Lkcm Small-mid vs. Ultra Short Fixed Income |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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