Correlation Between American Balanced and Lkcm Small
Can any of the company-specific risk be diversified away by investing in both American Balanced 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 American Balanced and Lkcm Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Lkcm Small Cap, you can compare the effects of market volatilities on American Balanced 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 American Balanced with a short position of Lkcm Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Lkcm Small.
Diversification Opportunities for American Balanced and Lkcm Small
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Lkcm is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund 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 American Balanced 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 American Balanced Fund 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 American Balanced i.e., American Balanced and Lkcm Small go up and down completely randomly.
Pair Corralation between American Balanced and Lkcm Small
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.69 times more return on investment than Lkcm Small. However, American Balanced Fund is 1.45 times less risky than Lkcm Small. It trades about 0.21 of its potential returns per unit of risk. Lkcm Small Cap is currently generating about 0.12 per unit of risk. If you would invest 3,406 in American Balanced Fund on November 3, 2024 and sell it today you would earn a total of 91.00 from holding American Balanced Fund or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Lkcm Small Cap
Performance |
| Timeline |
| American Balanced |
| Lkcm Small Cap |
American Balanced and Lkcm Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Lkcm Small
The main advantage of trading using opposite American Balanced and Lkcm Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced 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.| American Balanced vs. Qs Large Cap | American Balanced vs. Dodge Cox Stock | American Balanced vs. Americafirst Large Cap | American Balanced vs. Ab Large Cap |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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