Correlation Between Specialized Technology and Lsv Small
Can any of the company-specific risk be diversified away by investing in both Specialized Technology and Lsv 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 Specialized Technology and Lsv Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Specialized Technology Fund and Lsv Small Cap, you can compare the effects of market volatilities on Specialized Technology and Lsv 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 Specialized Technology with a short position of Lsv Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Specialized Technology and Lsv Small.
Diversification Opportunities for Specialized Technology and Lsv Small
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Specialized and Lsv is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Specialized Technology Fund and Lsv Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Small Cap and Specialized Technology 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 Specialized Technology Fund are associated (or correlated) with Lsv Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Small Cap has no effect on the direction of Specialized Technology i.e., Specialized Technology and Lsv Small go up and down completely randomly.
Pair Corralation between Specialized Technology and Lsv Small
Assuming the 90 days horizon Specialized Technology Fund is expected to generate 1.08 times more return on investment than Lsv Small. However, Specialized Technology is 1.08 times more volatile than Lsv Small Cap. It trades about 0.07 of its potential returns per unit of risk. Lsv Small Cap is currently generating about 0.05 per unit of risk. If you would invest 1,101 in Specialized Technology Fund on November 3, 2024 and sell it today you would earn a total of 121.00 from holding Specialized Technology Fund or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Specialized Technology Fund vs. Lsv Small Cap
Performance |
| Timeline |
| Specialized Technology |
| Lsv Small Cap |
Specialized Technology and Lsv Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Specialized Technology and Lsv Small
The main advantage of trading using opposite Specialized Technology and Lsv Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Specialized Technology position performs unexpectedly, Lsv 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 Lsv Small will offset losses from the drop in Lsv Small's long position.The idea behind Specialized Technology Fund and Lsv 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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