Correlation Between Fulcrum Diversified and Lkcm Equity

Can any of the company-specific risk be diversified away by investing in both Fulcrum Diversified and Lkcm Equity 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 Fulcrum Diversified and Lkcm Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Lkcm Equity Fund, you can compare the effects of market volatilities on Fulcrum Diversified and Lkcm Equity 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 Fulcrum Diversified with a short position of Lkcm Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Lkcm Equity.

Diversification Opportunities for Fulcrum Diversified and Lkcm Equity

0.74

Correlation Coefficient

Fulcrum Diversified  Lkcm Equity

Poor diversification

The 3 months correlation between Fulcrum and Lkcm is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Lkcm Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Equity Fund and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Lkcm Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Equity Fund has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Lkcm Equity go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Lkcm Equity

Assuming the 90 days horizon Fulcrum Diversified is expected to generate 2.65 times less return on investment than Lkcm Equity. But when comparing it to its historical volatility, Fulcrum Diversified Absolute is 2.36 times less risky than Lkcm Equity. It trades about 0.04 of its potential returns per unit of risk. Lkcm Equity Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,114  in Lkcm Equity Fund on October 10, 2024 and sell it today you would earn a total of  601.00  from holding Lkcm Equity Fund or generate 19.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fulcrum Diversified Absolute  vs.  Lkcm Equity Fund

Fulcrum Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum Diversified Absolute has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fulcrum Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lkcm Equity Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lkcm Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Fulcrum Diversified and Lkcm Equity

The main advantage of trading using opposite Fulcrum Diversified and Lkcm Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fulcrum Diversified position performs unexpectedly, Lkcm Equity 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 Equity will offset losses from the drop in Lkcm Equity's long position.

The idea behind Fulcrum Diversified Absolute and Lkcm Equity Fund 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 Anywhere module to track or share privately all of your investments from the convenience of any device.