Correlation Between Pace Smallmedium and Lkcm Small

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

Diversification Opportunities for Pace Smallmedium and Lkcm Small

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Pace and Lkcm is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Value and Lkcm Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Cap and Pace Smallmedium 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 Pace Smallmedium Value are associated (or correlated) with Lkcm Small. 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 Cap has no effect on the direction of Pace Smallmedium i.e., Pace Smallmedium and Lkcm Small go up and down completely randomly.

Pair Corralation between Pace Smallmedium and Lkcm Small

Assuming the 90 days horizon Pace Smallmedium is expected to generate 1.66 times less return on investment than Lkcm Small. But when comparing it to its historical volatility, Pace Smallmedium Value is 1.14 times less risky than Lkcm Small. It trades about 0.15 of its potential returns per unit of risk. Lkcm Small Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,135  in Lkcm Small Cap on August 30, 2024 and sell it today you would earn a total of  249.00  from holding Lkcm Small Cap or generate 11.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Pace Smallmedium Value  vs.  Lkcm Small Cap

 Performance 
       Timeline  
Pace Smallmedium Value 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pace Smallmedium Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pace Smallmedium may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Lkcm Small Cap 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Lkcm Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pace Smallmedium and Lkcm Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pace Smallmedium and Lkcm Small

The main advantage of trading using opposite Pace Smallmedium and Lkcm Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Smallmedium position performs unexpectedly, Lkcm Small 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 will offset losses from the drop in Lkcm Small's long position.
The idea behind Pace Smallmedium Value and Lkcm Small 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.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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